Limited upside for SET amid foreign funds outflow and Covid crisis
The Stock Exchange of Thailand (SET) Index rose by 3.49 points, or 0.22 per cent, to 1,555.93 at 10am on Monday. The volume of total transactions was THB8.46 billion with an index high of 1,559.60 and a low of 1,554.27.
Krungsri Securities forecast the SET Index on Monday would fluctuate between 1,545 and 1,565 points despite hopes of an economic recovery after the US and Europe showed strong economic data, especially the Purchasing Managers Index in both manufacturing and services.
It said the index would be under pressure due to the outflow of foreign funds, the US Federal Reserve’s move to raise the interest rate and Thailand’s rising Covid-19 cases.
It recommended that investors buy:
▪︎ BDMS, BCH and CHG, which gained positive sentiment from mass vaccination.
▪︎ SCGP, IRPC and COM7, which will be listed on the MSCI Index on May 27.
▪︎ OR, SCGP, KEX, JR, NEX, NRF, RT, SA and SO, which will be listed on the FTSE Index on June 18.
The SET Index closed at 1,552.44 on Friday, down 2.10 points or 0.14 per cent. Total transactions amounted to THB80.93 billion with an index high of 1,560.51 and a low of 1,546.55, as the index fell for a third straight day.
Baht opens firm, but Asian currencies unable to gain from weakening dollar due to Covid
The baht opened at 31.37 to the US dollar on Monday, unchanged from Fridays close.
The Thai currency is likely to move between 31.30 and 31.45 during the day and between 31.20 and 31.50 this week, Krungthai Bank market strategist Poon Panichpibool said.
He suggested that investors monitor the dollar’s direction and the sales of assets in Asia.
The market strategist added that the US currency could weaken or be stable if the market is in a risk-on state.
He said that the Covid-19 crisis had pressured Asian currencies, so they fluctuated and did not strengthen despite the dollar weakening.
Poon predicted that the baht’s resistance would be at around 31.50 to 31.60 per US dollar, as it was the point where exporters aimed to sell the dollars they were holding.
Gold continues last weeks upward trend despite sell-offs
The price of gold in Thailand rose by THB100 per baht weight in morning trade on Monday despite mass sell-offs of the precious metal after its price had risen for six consecutive days.
The Gold Traders Association report at 9.30am showed buying price of a gold bar at THB27,900 per baht weight and selling price at THB28,000, while gold ornaments were priced at THB27,394.12 and THB28,500, respectively.
At close on Saturday, the buying price of a gold bar was THB27,800 per baht weight and selling price THB27,900, while gold ornaments were priced at THB27,303.16 and THB28,400, respectively.
The price had risen by THB600 per baht weight last week.
Spot gold price on Monday was US$1,886 (THB59,217) per ounce compared to Friday when it dropped by $5.2 to $1,876.7 per ounce.
Hong Kong gold price on Monday rose by HK$50 to $17,430 (THB70,488) per tael, the Chinese Gold and Silver Exchange Society reported.
Alcohol industry feels the pinch as pandemic hits sales
The revenue of the alcohol industry might drop to its lowest in 10 years.
Thanakorn Kuptajit, secretary-general of the Thai Alcohol Business Association, said the third outbreak had a serious impact on the overall business sector including the alcohol industry because many clusters were difficult to control and occurred in large cities, urban, metropolitan areas, and major tourist cities, which are areas that generate the most income.
“The first and second outbreaks were still limited to a few clusters, making it easier to control them. However, the third wave has spread rapidly and occurs in many clusters, making it difficult to control.
“The vaccine is still at the heart of containing the pandemic. The government has to accelerate vaccination to build immunities in as many groups as possible,” said Thanakorn.
The alcohol industry has been affected since the pandemic began.
In 2019, the alcohol industry had a total market value of about THB370 billion, close to the year 2018, which was a period of slight growth. However, since the Covid-19 outbreak in 2020, sales have dropped to just THB300 billion due to various factors, especially the lockdown measures, the nationwide ban on selling alcoholic beverages, tourist attractions being shut down due to lack of foreign tourists and the sluggish economy.
In April 2021, sales in restaurants and beverage shops, pubs and bars were severely affected. As a result, some operators had to close their business immediately and that indirectly affect others involved, such as suppliers, employees, singers, musicians, cooks, etc.
If the outbreak and the severity are controlled within the third quarter, the business sector will start to return to normal from October onwards. The fourth quarter is considered a high season for many businesses. The government should have a policy to stimulate purchasing power and the economy, Thanakorn said.
The Alcohol industry is expected to have a total revenue of about THB240-250 billion.
By the end of this year, it is expected that the market value of the entire industry will drop to only THB200 billion since the fourth quarter of the year is the peak period. If business does not return to normal, revenue will be down by THB40-50 billion, making it the lowest in more than 10 years of the alcohol industry, Thanakorn said.
“The most heavily affected alcohol at the moment is the premium group whose sales lost 70-80 per cent as consumers turned to other illegal channels for cheaper alcohol. For example, instead of brands priced at THB1,000-2,000 per bottle, they turned to drinks that were THB700-800 per bottle,” said Thanakorn.
Prospects for biodiesel upbeat in the short term: Krungsri report
Over the next three years, the biodiesel industry will enjoy improved business conditions thanks to an average annual increase of 3-4 per cent in domestic demand, which will then bring consumption to 5.3-5.7 million litres per day, according Krungsri Researchs outlook.
The study said there would be stronger demand for diesel from the transport sector, which will be driven by:
▪︎a rebound in economic activity, ever-greater e-commerce sales and a steady rise in the number of diesel-powered vehicles on Thai roads.
▪︎Government efforts to rebalance the palm oil market, together with the increase in the total area of oil palm under cultivation and the resulting growth in supply;
▪︎The move by auto manufacturers to put greater efforts into developing diesel engines that can run on fuels that have a high biodiesel content.
Despite the generally positive outlook, challenges will remain for the industry, including uncertainty over security of supply of inputs (of palm oil), the possibility that government intervention in the market to help palm growers may affect the price of inputs, and the government support for electrical vehicles production, the study said. Because of this, future profits may come under threat.
Krungsri Research sees demand for biodiesel rising by an average of 3-4 per cent per year over 2021-23 to 5.3 million to 5.7 million litres per day. Demand for diesel in the transport sector will tend to strengthen on:
▪︎recovery in the Thai economy and forecast annual growth of 3 per cent;
▪︎expansion in Thai e-commerce that e-Conomy SEA 2020 predicts will lift the value of the market from US$9 billion in 2020 to US$24 billion in 2025 (average growth of 21 per cent per year) and that will drive stronger demand for commercial delivery services, and especially for the use of pickup trucks; and
▪︎an average annual 3-4 per cent expansion in the number of diesel vehicles registered in Thailand.
The government’s efforts to balance the market for palm oil are also feeding stronger demand for biodiesel, most notably with the 2020 switch from B7 to B10 as the standard diesel mix, though this will likely rise again in the future in line with an anticipated expansion in the domestic supply of palm oil, the study said. The latter will be driven by the government’s efforts to increase the total area of oil palm plantations from 5.9 million rai (944,000 hectares) in 2020 to 10 million rai by 2029 and to lift daily CPO production to around 3 million to 3.2 million litres, which should then help to keep the cost of inputs relatively flat for biodiesel producers.
These moves to increase domestic consumption of biodiesel are also in step with those of other regional governments: in Malaysia, B20 should replace B10 as the standard diesel mix in December this year, while in Indonesia, B40 should replace B30 as the standard mix in 2022.
Auto manufacturers are developing new engines that are capable of running on diesel mixes with a higher biodiesel content, and these will be available for large vehicles, pickups, SUVs and trucks. At present, Isuzu and Toyota control 80 per cent of the market for pickups that can run on B20.
Krungsri Research forecasts domestic demand for high-speed diesel rising by an average of 2-3 per cent per year over 2021-23.
Over the next three years, demand for B7 will drop to 28 million to 30 million litres per day from 2020’s daily demand of 43.8 million litres, while B10 consumption will rise from 16.2 million to 32-38 million litres per day. However, demand for B20 will remain relatively weak since its price is similar to that of B7 and B10, a result of the government’s decision to relieve pressure on the Oil Fund by cutting price support for B20, and consumer fears that using B20 may have long-term effects on their vehicles and/or require them being retuned or fitted with additional equipment. Nevertheless, the government still plans to raise the standard mix above B10 when the conditions are right, and officials have a long-term plan to increase the diesel mix to 23 per cent biodiesel by 2037.
Krungsri Research expects demand for biodiesel will continue to rise, and in response, manufacturers will expand their production capacity.
Overall, capacity utilisation is therefore forecast to rise only slightly, edging up to around 60-62 per cent from its 2020 level of 59 per cent.
Despite the generally positive outlook for the next few years, challenges remain for the industry. Players will need to manage their production costs carefully since there is a possibility of periodic shortages of CPO, which would then tend to push up operating costs, the study said.
Over the long term, the increasing interest in electric vehicles also poses a threat to the industry.
At present, the Department of Energy aims to have electric vehicles make up 30 per cent of auto output by 2030. As of 2020, electric vehicles accounted for only 3.5 per cent of all new vehicle registrations.
It is expected that as soon as 2025, the purchase price of new electric cars would be equivalent to that of traditional internal combustion engine-powered autos.
Given this outlook, demand for oil, including biodiesel, is likely to come under threat in the future.
The Stock Exchange of Thailand (SET) Index closed at 1,552.44 on Friday, down 2.10 points or 0.14 per cent. Total transactions amounted to THB80.93 billion with an index high of 1,560.51 and a low of 1,546.55, as the index fell for a third straight day.
In the morning session, Krungsri Securities forecast the SET Index on Friday would fluctuate between 1,545 and 1,565 points despite positive sentiment following a decline in US jobless claims.
It said the index would be under pressure due to uncertainty after the US Federal Reserve said it would be open “at some point” to discussing a scaling back of its massive bond purchases, or quantitative easing (QE).
“Also, the falling oil price will pressure energy shares,” Krungsri Securities added.
The 10 stocks with the highest trade value today were SIRI, PTT, KBANK, IRPC, KTC, CPALL, SCC, SCGP, PTTEP and TTA.
Other Asian indices were mixed:
Japan’s Nikkei Index closed at 28,317.83, up 219.58 points or 0.78 per cent.
China’s Shanghai SE Composite Index closed at 3,486.56, down 20.39 points or 0.58 per cent, while the Shenzhen SE Component Index closed at 14,417.46, down 117.64 points or 0.81 per cent.
Hong Kong’s Hang Seng Index closed at 28,458.44, up 8.15 points or 0.029 per cent.
South Korea’s KOSPI closed at 3,156.42, down 5.86 points or 0.19 per cent.
Taiwan’s TAIEX Index closed at 16,302.06, up 259.70 points or 1.62 per cent.
Fed signal on QE, oil price expected to cast shadow over SET
The Stock Exchange of Thailand (SET) Index rose by 2.59 points, or 0.17 per cent, to 1,557.13 at 10am on Friday. The volume of total transactions was worth THB4.82 billion with an index high of 1,560.51 and a low of 1,556.97.
Krungsri Securities forecast that the SET Index would fluctuate between 1,545 and 1,565 points despite positive sentiment of a decline in US jobless claims.
It said the index would be under pressure due to uncertainty over the US Federal Reserve’s signal it would be open “at some point” to discussing a scaling back of its massive bond purchases, or quantitative easing (QE).
“Besides, the falling oil price would pressure energy shares,” Krungsri Securities added.
It recommended that investors buy:
▪︎ BDMS, BCH and CHG, which have gained positive sentiment from the mass vaccination.
▪︎ HANA, KCE, TU, CPF and EPG, which benefit from the weakening baht.
▪︎ CK, STEC, ITD, NWR, UNIQ, which benefit from the e-bidding of Den Chai-Chiang Khong double-track railway project.
The SET Index closed at 1,554.54 on Thursday, down 7.70 points or 0.49 per cent. Total transactions amounted to THB90 billion with an index high of 1,568.72 and a low of 1,554.54.
Baht opens stronger but could weaken in the short term, says analyst
The baht opened at 31.37 to the US dollar on Friday, strengthening slightly from Thursday’s closing rate of 31.45. The Thai currency is likely to move between 31.35 and 31.45 during the day, Krungthai Bank market strategist Poon Panichpibool said.
He predicted that the baht would weaken in the short term due to the market situation and the Covid-19 crisis in Thailand. However, the weakening of the dollar will prevent the baht from sliding further.
Poon said the baht’s resistance would be around 31.50 to 31.60 to the dollar, as exporters were expected to offload their dollars at that rate.
Also, the support point would be when the baht moves closer to 31.30, when importers would want to purchase the dollar.
Poon, however, believed the baht would strengthen in the near future because of a weakening dollar as well as Covid-19 vaccinations for the general Thai public, which would draw investors back to the country.
Gold up slightly on weaker dollar, lower US bond yield
The price of gold rose by THB50 per baht weight in morning trade on Friday, due to the weakening dollar and decline in US bond yield.
The Gold Traders Association report at 9.24am showed buying price of a gold bar at THB27,700 per baht weight and selling price at THB27,800, while gold ornaments were priced at THB27,197.04 and THB28,300, respectively.
The buying price of a gold bar at close on Thursday was THB27,650 per baht weight and selling price THB27,750, while gold ornaments were priced at THB27,151.56 and THB28,250, respectively.
Spot gold price on Friday was US$1,871 (THB58,712) per ounce compared to Thursday when it rose by 40 cents to $1,881.9 per ounce.
Hong Kong gold price on Friday dropped by HK$10 to $17,350 (THB70,135) per tael, the Chinese Gold and Silver Exchange Society reported.
Jobless claims set a pandemic low as GOP-led states move to slash unemployment benefits
WASHINGTON – Some 444,000 Americans filed first-time unemployment claims last week, the Labor Department reported Thursday, chalking up another pandemic low as the labor market continues to recover and a cluster of state lawmakers threaten to slash benefits.
That’s down 34,000 from the previous week’s upwardly revised level, marking the third consecutive weekly decline in initial unemployment claims. Georgia, Kentucky, Texas, Michigan and Alabama saw some of the biggest drop-offs in filings. New Jersey, Washington and Oklahoma were among the only states with spikes in claims greater than 1,000.
At this time last year, weekly unemployment claims ballooned past 2.3 million.
Now, claims are at their lowest level since mid-March 2020. The report comes as a wave of 22 Republican-led states say they will opt out of expanded unemployment benefits, which they argue are preventing people from returning to the labor market. The temporary $300 weekly benefit was slated to expire in September, but states such as Texas, Arizona and Ohio plan to cut it off in June.
Job openings hit a record high in March, surging 8% to 8.1 million as loosening pandemic restrictions and widespread vaccinations boosted activity, the Labor Department reported. But businesses around the country say they are struggling to find workers: Applebee’s is offering free appetizers to job applicants, while a Florida McDonald’s is paying $50 to those who show up for an interview. About 44% of small businesses had job openings they couldn’t fill in April, a record high according to the National Federation of Independent Business.
“The current situation is extremely complicated, even as we rejoice over the progress with vaccinations, lower COVID case counts and the ability to resume previously restricted activities,” Mark Hamrick, senior economic analyst at Bankrate.com, said Thursday in comments emailed to The Post. “There are challenges to address including what the return to office or work looks like and resolving constraints of labor and supplies.”
Calls to slash benefits started after April’s jobs report came in wildly below expectations, with just 266,000 positions added to the U.S. economy when economists had been projecting 1 million. While Republican governors blamed overly generous benefits for hampering the labor market, Democrats and labor experts say the reality is more complicated. It’s the problems the pandemic has compounded: unaffordable child care, unsafe working conditions, low wages, in-person work requirements and the inconsistency of unemployment insurance.
Cuts are likely to fall hardest on roughly 3.4 million people who benefit from stimulus programs that Congress adopted at the height of the coronavirus pandemic, including one targeting those who either are self-employed or work on behalf of gig-economy companies such as Uber. Beginning next month, many of these workers are likely to receive no aid at all.
States reported more than 95 million initial claims for Pandemic Unemployment Assistance, for gig and self-employed workers, for the week that ended May 15. Nearly 6.6 million PUA claims were continued in early May for the benefits that are set to expire in September.
While initial claims declined, continuing unemployment claims edged up 111,000 from the previous week, to 3.75 million. The total number of Americans drawing some form of unemployment benefits is nearly 16 million, near historic highs.
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