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Trading on Thai bourse normal after new rule on short sales, says SET chief

EconOct 09. 2020

By The Nation

The Stock Exchange of Thailand (SET) has confirmed that the volume of short sales was normal after implementing the zero-plus-tick rule, while promising to monitor trading closely.

Previously, the SET used the uptick rule that allowed investors to engage in short-selling only when the share price was higher than the latest trading price, to mitigate market volatility. It announced recently that from October 1 onwards, it would use the old zero-plus-tick rule, which enables investors to engage in short-selling when the share price is higher or equal to the latest trading price.

SET president Pakorn Peetathawatchai said there was no change in investor behaviour, as the volume of short sales in the past eight days was 1-4 per cent from 4-8 per cent when uptick rules were in effect.

However, he said the SET would closely monitor investor behaviour and the volume of short sales to check if there were any abnormalities.

“Also, the SET would monitor the stock market situation closely because of the US presidential election next month, which may impact global stock indices,” he said.

He expected the market capitalisation of initial public offering (IPO) shares this year to hit the target although many large companies have postponed their issues.

“We believe that PTT Oil and Retail Business [PTTOR]’s move to postpone its IPO to next year was not due to the stock market situation, because several investors would be interested in buying PTTOR shares and many companies are offering IPO shares in the stock market,” he said.

“However, we want more large, medium, and small companies to list on the stock market although the market is not currently on the upside, because there are sufficient positive sentiments to boost investment.”

The president of the Market for Alternative Investment (mai), Prapan Charoenprawatt, said some companies had postponed their offerings in the market which may be due to Covid-19’s impact on their financial budget.

“Since the beginning of this year, six companies have been listed on the MAI, while expecting that up to five companies were ready to raise funds in the market,” he said.

Securities and Exchange Commission (SEC) assistant secretary-general Jomkwan Kongsakul said approximately 30 companies were waiting to launch IPOs, adding that medium and small companies had postponed their offerings as well.

“The postponement of IPOs may be due to market volatility and companies’ intention to set up an IPO share price. However, companies must inform the SEC if they want to update their filing information,” she said.

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SET faces volatility from sell-offs to mitigate risks from political rally next week

EconOct 09. 2020

By The Nation

The Stock Exchange of Thailand (SET) Index fell by 0.49 points, or 0.04 per cent, to 1,274.34 in the morning session on Friday.

An analyst at Krungsri Securities expected the index to fluctuate between 1,265 and 1,285 despite the rise in oil price and ongoing progress in the US economic stimulus measures.

“Investors should beware of mass sell-offs of shares to mitigate risks from the political rally next week, as it would pressure the index,” he said.

As an investment strategy, he recommended that investors buy:

▪︎ PTTEP, TOP and PTTGC that will benefit from rising oil price.

▪︎ CRC, HMPRO, JMART, COM7, KTC, CENTEL and MINT that will benefit from the government’s “Shop Dee Mee Kuen” (Shop and Payback) scheme.

▪︎ TU, PLANB, STGT, COM7, ASIAN and CBG whose third-quarter performance is expected to grow.

The SET Index closed at 1,274 on Thursday, up 11.12 points or 0.88 per cent, while transactions amounted to Bt56 billion in response to the news of US President Donald Trump’s U-turn on stimulus measures and Thailand’s Centre for Economic Situation Administration approving the “Shop Dee Mee Kuen” (Shop and Payback) scheme to stimulate consumer spending.

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Gold price rises over ongoing progress of US economic stimulus measures

EconOct 09. 2020

By The Nation

The price of gold rose by Bt200 per baht weight in morning trade on Friday, the Gold Traders Association reported.

As of 9.21am, the buying price of a gold bar was Bt28,000 per baht weight and selling price Bt28,100, while gold ornaments were priced at Bt27,500.24 and Bt28,600, respectively.

At close on Thursday, the buying price of a gold bar was Bt27,800 per baht weight and selling price Bt27,900, while gold ornaments were Bt27,303.16 and Bt28,400, respectively.

Spot gold price moved to US$1,905 (Bt59,278) per ounce on Friday morning after the price rose by $43 to $1,895.1 per ounce at Thursday’s close in response to ongoing progress of US economic stimulus measures after US President Donald Trump expressed confidence that the White House and the Democrats could reach an agreement to roll out these measures.

Hong Kong gold price rose by HK$70, opening at $17,550 (Bt70,469) per tael this morning, the Chinese Gold and Silver Exchange Society reported.

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Stocks climb to five-week highs; bonds gain

EconOct 09. 2020

By Syndication Washington Post, Bloomberg · Claire Ballentine, Vildana Hajric · BUSINESS, US-GLOBAL-MARKETS 
U.S. stocks rose to almost five-week highs as traders speculated that lawmakers will eventually provide more stimulus and corporate deal activity increased. Treasury bond yields dropped and the dollar weakened.

The S&P 500 finished up 0.8% after conflicting comments from President Donald Trump and House Speaker Nancy Pelosi, D-Calif., whipsawed equity markets earlier in the day. Energy, utilities and financials were the biggest gainers in the benchmark index, with crude oil rallying as Hurricane Delta approached the already battered Louisiana coast.

“It’s likely that there will continue to be near-term volatility due to the back-and-forth over a deal,” UBS Global Wealth Management strategists led by Mark Haefele wrote in a note. “A stimulus deal will be struck eventually, central banks will continue to stay supportive, and medical developments still have scope to surprise, in our view.”

Eaton Vance leaped after the investment firm agreed to be taken over by Morgan Stanley. IBM surged after saying it will spin off its infrastructure unit. Regeneron Pharmaceuticals rose after Trump said its antibody cocktail was the “key” to his quick recovery. The president said he would authorize its emergency use.

Bulls are now back in control of a market that’s increasingly betting that a Joe Biden presidential victory and gains by Democrats in Congress will be good for equities. The scenario seems to be somewhat quelling volatility even as risks from a split in government to a resurgence of coronavirus cases threaten the economic rebound.

“At this point the market is likely projecting a Biden victory,” said Bill Fitzpatrick, managing director at Logan Capital Management. “It’s a scenario worth considering that we don’t get results for a month or so after the election, that’s a real possibility.”

Meanwhile, Pelosi said there won’t be a standalone bill on airlines without a guarantee the other stimulus items are going to be addressed. Trump had earlier touted progress in talks even though there was no sign the two sides are any closer on a deal.

Elsewhere in markets, airlines led European shares higher, helped by as optimism over a covid-19 treatment. U.K. jet engine-maker Rolls-Royce Holdings posted its best five-day performance on record, after shoring up its finances.

Oil futures rose 3.1% after Gulf of Mexico producers shut in 1.7 million barrels a day of crude production ahead of the storm that’s expected to slam into the Louisiana coast on Friday. Gold increased for a second day.

– – –

These are some of the main moves in markets:

Stocks

– The S&P 500 index increased 0.8%, to 3,446.85 as of 4:01 p.m. New York time, the highest in almost five weeks.

– The Dow Jones industrial average rose 0.4%, to 28,425.71, the highest in five weeks.

– The Nasdaq composite index climbed 0.4%, to 11,420.98, the highest in almost five weeks.

– The Nasdaq 100 index rose 0.4%, to 11,550.94.

– The Stoxx Europe 600 index jumped 0.8%, to 368.31, the highest in almost three weeks.

Currencies

– The Bloomberg Dollar Spot Index decreased 0.2%, to 1,170.35.

– The euro was little changed at $1.176.

– The Japanese yen was little changed at 106 per dollar, the weakest in almost four weeks.

Bonds

– The yield on 10-year Treasuries fell two basis points, to 0.76%.

– The yield on 30-year Treasuries decreased two basis points, to 1.56%.

– Germany’s 10-year yield fell three basis points, to -0.52%, the largest drop in more than two weeks.

– Britain’s 10-year yield declined one basis point, to 0.289%, the biggest fall in more than a week.

Commodities

– West Texas Intermediate crude climbed 3.2%, to $41.26 a barrel, the highest in almost three weeks.

– Gold strengthened 0.3%, to $1,894.64 an ounce.

– Copper gained 0.2%, to $3.04 a pound, the highest in more than two weeks.

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Stimulus packages may result in lower contraction in year’s last quarter

EconOct 09. 2020Thanavat Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC) 

By The Nation

The government’s many stimulus packages should reduce the previously estimated economic contraction in the fourth quarter, said Thanavat Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC).

The Centre for Economic Situation Administration on Tuesday approved a new stimulus measure granting income tax deduction of up to Bt30,000 per person to help boost their spending on goods and services.

The measure, which is awaiting Cabinet approval, will run from October 23 until December 31 and apply to the 2020 tax year. Around 4 million people are expected to be eligible for this scheme.

The government recently launched two other stimulus measures worth more than Bt60 billion to boost domestic consumption and people’s purchasing power.

Thanavat said all stimulus packages are estimated to inject Bt110 billion into the economy, which should boost growth in the fourth quarter to 2 to 3 per cent, bringing the previously estimated contraction down to between minus 4 and minus 5 per cent from minus 6 to minus 7 per cent.

Meanwhile, the consumer confidence index in September dropped to 50.2 from 51 in August, marking the first fall over the past five months, according to UTCC survey. The survey was conducted on 2,244 respondents.

This drop was due to people’s concern over political stability and the resignation of economic guru Predee Daochai from the finance ministry’s post.

New Finance Minister Arkhom Termpittayapaisith is set to take office on Monday.

The respondents were also worried about slow economic recovery and possible job losses in the future due to the Covid-19 outbreak, which has crippled the tourism sector.

Thanavat added that if the economy fails to recover in the fourth quarter, it may result in the loss of 500,000 jobs in the tourism sector.

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Govt urged to set up corporate bond guarantee fund to rescue tourism industry

EconOct 09. 2020

By The Nation

Thailand needs to set up a corporate bond guarantee fund in order to rescue tourism-related industries that have been hit hard by the Covid-19 pandemic, Tada Phutthitada, president of the Thai Bond Market Association (Thai BMA), said on Thursday.

The fund may be set up by the government with a fund size of Bt50 billion, which would enable it to guarantee corporate bonds up to Bt125 billion, or 2.5 times, he said.

Tourism-related industries, such as hotels, could raise funds by issuing bonds with three-year maturity and the guarantee fund will compensate investors when issuers default on payment.

Three years maturity would be enough as  tourism is likely to recover from the coronavirus outbreak, he said.

The bond guarantee fund will be similar to Malaysia’s Danajamin, a financial guarantee for bonds and Sukuk issuance. Malaysia has been successful in implementing the bond guarantee fund, supporting businesses to raise funds via issue of bonds and create investor confidence, said Ariya Tiranaprakij, senior executive vice president of Thai BMA.

The Thai government may make use of the Bt400-billion Covid-19 recovery fund, which has been little utilised, she said. Or money could be drawn from the central bank’s Corporate Bond Stabilisation Fund,  which has not been utilised much since its launch in April, she said.

Thailand currently has the Thai Credit Guarantee Corporation, but it provides only bank loan guarantee.

In the first nine months this year, companies issued bonds worth Bt540 billion. They are expected to raise funds via bonds for the rest of the year, said Tada, and forecast total corporate bonds worth Bt800 billion for this year.

Outstanding bonds in the first nine months rose 5.09 per cent to Bt14.2 trillion from the end of last year. The issuance of government bonds contributed to the rise of outstanding bonds, but outstanding corporate bonds dropped.

Banks decreased their short-term debenture issuance, while energy firms increased their long-term bond issuance.

Between January and September, foreign investors sold government bonds worth of Bt71.3 billion, comprising  Bt64.1 billion short-term bonds and Bt7.3 billion long-term.

Thai bond holdings of foreign investors dropped from Bt916.8 billion to Bt848.8 billion, representing 6 per cent of total outstanding bonds.

Foreign investors are waiting to see the outcome of the US presidential election. They want to see how US election will affect the Thai economy. Thai government bonds remain attractive due to the lower inflation rate relative to those of neighbouring countries, but market uncertainty remains, Tada added.

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SET faces challenges this year before riding funds influx in 2021

EconOct 09. 2020

By The Nation

An expert at Asia Plus Securities expected the Stock Exchange of Thailand (SET) to hit 1,500 points next year due to high liquidity and the return of foreign funds, but pointed out five negative factors that would pressure the index in the remainder of this year.

Asia Plus Securities’ executive vice president of research, Therdsak Thaveeteeratham, expected listed companies’ profit next year to average Bt72.51 per share from Bt56.65 per share this year, as the quarterly profit is expected to bottom out since the second quarter of this year.

He expected the SET to hit 1,450 points next year and 1,526 points if the Bank of Thailand’s Monetary Policy Committee cut the interest rate one more time this year.

“The positive sentiment that would help boost the SET is high liquidity of Bt15.5 trillion, higher than the index market capitalisation of Bt13 trillion. According to previous statistics, the cash is likely to flow into the index when the deposits are higher than the index market capitalisation, especially when the interest rate is likely to stay at a low level for 1-2 years because the return on deposit was not high,” he said.

“In addition, foreign funds are likely to return to the market after they continued selling until their shareholding in the Thai stock market fell to 25.8 per cent currently.

Meanwhile, large investors have opened 510,000 accounts this year from the previous 300,000 accounts which helped boost the price of small-cap shares.”

However, he said the SET would be pressured by five negative sentiments:

▪︎ Second wave of Covid-19: This fear has caused several countries to impose lockdown measures and caused global stock markets to face correction in September.

▪︎ Domestic political situation: Investors should follow this factor closely because the past political rallies had caused the SET to fall by 6.2 per cent, while the rally organised by the Free People’s movement caused the index to fall by 7.4 per cent.

▪︎ US presidential election: Going by trends in the previous three elections, the SET will fall one month before and after the election, but the index is likely to rise one year after the election. Therefore, investors should buy shares one week before the election when the market faces correction. If Joe Biden wins the election, cash is likely to flow into the US due to his policy to raise tariffs on US companies.

▪︎ SCG Packaging (SCGP) listing on SET: Eighteen mutual funds decided to sell large-cap shares to buy SCGP shares worth Bt23 billion. Meanwhile, SCGP would be listed in the SET50 or SET100 automatically, as its market capitalisation was around Bt140 billion to Bt150 billion, so Thanachart Capital (TCAP) and The Erawan Group (ERW) would be delisted from SET50 and SET100, respectively.

▪︎ SET’s old short sales and ceiling/floor regulations: Various risks will cause more impact on the SET due to its old short sales and ceiling/floor regulations.

Therdsak added that the government’s “Shop Dee Mee Kuen” (Shop and Payback) measure to stimulate domestic consumption would help boost shares in the retail group, advising investors to buy Central Retail Corporation (CRC), SPVI and Jay Mart (JMART) shares as their prices were currently cheap.

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Jobless claims declined last week while remaining elevated

EconOct 09. 2020Waiters assist diners at a restaurant in New York on Sept. 26, 2020. MUST CREDIT: Bloomberg photo by David Dee Delgado. 

By Syndication Washington Post, Bloomberg · Olivia Rockeman · BUSINESS, US-GLOBAL-MARKETS, CAREER-WORKPLACE
The number of Americans seeking unemployment benefits fell for a second week while remaining elevated, as the labor market makes scant progress amid risks of further weakness without additional federal stimulus.

Initial jobless claims in regular state programs decreased by 9,000 to 840,000 in the week ended Oct. 3, with the prior week’s figure revised higher by 12,000, Labor Department figures showed Thursday. Continuing claims, the total number of Americans on state benefit rolls, fell to 11 million in the week ended Sept. 26, a bigger-than-expected drop.

Even so, seven months into the pandemic, initial claims are still about four times the pre-virus level, and higher than the peak of the 2007-09 recession. For the latest week, economists expected initial claims of 820,000 and for continuing claims of 11.4 million, according to median estimates in a Bloomberg survey.

The report came with the same major caveat as last week: The figures from California, the most populous state, used numbers identical to the previous week because the state temporarily halted acceptance of new applications for two weeks to improve its systems and address a backlog of filings.

“The stubbornly high level of claims may already be starting to reflect the large corporate job cuts announced last week. The report continued to exclude California’s numbers as the state put applications on hold for two weeks, announced on Sept. 19, to revamp its system,” Bloomberg economist Eliza Winger said.

The slight drop in new claims underscores the gradual improvement that the labor market has seen since the initial lockdowns of the pandemic eased. Even so, recent layoff announcements from companies including Walt Disney Co. and Allstate Corp. as well as multiple airlines could start showing up in the numbers in the coming weeks.

At the same time, President Donald Trump’s mixed messages on additional federal stimulus have fueled more uncertainty across the world’s largest economy as Federal Reserve Chair Jerome Powell warns it will face longer-lasting scars and a weak recovery without sufficient aid.

“Even as filings are declining, levels remain extraordinarily high,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note. “Employment growth has already slowed and without fiscal support that protected jobs, risks are skewed to the downside for payrolls going forward.”

U.S. stocks opened higher after the jobless claims report, while 10-year Treasury yields and the dollar both fell.

The confusion comes as unemployment persists for many Americans. While continuing claims fell by 1 million, that could reflect recipients exhausting regular benefits and moving to state programs that provide extended benefits. Also, the number of Americans transitioning onto Pandemic Emergency Unemployment Compensation — a federal program for people who have exhausted state benefits — increased by 153,700 to 1.96 million in the week ended Sept. 19.

The biggest increases in new unemployment claims on an unadjusted basis were in Florida, Illinois, Virginia and Massachusetts, which may reflect cuts at major airline hubs. New Jersey, Pennsylvania, Louisiana and Michigan saw declines.

The total number of Americans claiming Pandemic Unemployment Assistance — a federal program for self-employed and gig workers — decreased by 433,500 to 11.4 million in the week ended Sept. 19, while initial filings dropped by 44,270 last week to about 464,400.

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Wall Street is helping private equity recycle its aging assets

EconOct 08. 2020Pedestrians walk past the New York Stock Exchange on a nearly empty Wall Street in New York on March 30, 2020. MUST CREDIT: Bloomberg photo by Gabby Jones. 

By Syndication Washington Post, Bloomberg · Benjamin Robertson · BUSINESS, US-GLOBAL-MARKETS 
Private equity firms are prolonging the shelf lives of their aging assets with deals that are proving increasingly popular with managers, but not with all investors.

Firms under pressure to offload assets from their expiring funds are opting to repackage them into new vehicles as the pandemic curbs the usual exit routes via sales or IPOs. This once obscure corner of the private equity industry has grabbed Wall Street’s attention, with the likes of Goldman Sachs joining investors and Citigroup advising on deals.

Buyout firms are becoming more inventive as business models that usually cap a fund’s lifespan at a decade prove too rigid for covid-stricken markets. As well as offering an alternative exit route for investors wanting to cash in their holdings, so-called general partner-led secondary deals allow firms to keep top-performing assets and juice even more returns from them — often meaning even higher fees.

“The market used to be the Wild West,” said Harold Hope, head of Goldman’s secondaries investment unit in New York. “Even two years ago we saw some managers go to their investors with GP-led deals and get shot down. Deals are more stable now. There are better standards.”

In July, Goldman led investors in a $1 billion deal that enabled private equity firm Riverstone Holdings to shift renewable energy firm Enviva Holdings into a new separate fund. When Permira decided to repackage four companies from its maturing flagship fund in May, Coller Capital led investors in an $829 million deal. In both cases, some investors cashed out entirely.

But with the manager as both buyer and seller, the deals come with a health warning. Investor body Institutional Limited Partners Association has cautioned about conflicts of interest and urged that investors are on board, while the Securities and Exchange Commission has waved similar red flags. Another concern is that managers can undervalue assets when moving them, and so trigger higher performance fees upon their next revaluation.

“Managers might try to take advantage of covid-depressed prices and set themselves up with nice lower valuations,” said Simon Saitowitz, a specialist in secondaries deals and partner at law firm Fried, Frank, Harris, Shriver & Jacobson. In the past few months, he’s fielded more requests for GP-led restructurings than for the whole of last year.

When London-based Permira carried out its May transaction, the firm sought to allay investor concerns by keeping the same terms for those that opted to stay in, said a person familiar with the deal. Around a third of the original investors took the opportunity to exit, said the person. A spokesman for the firm declined to comment.

The advisory side has typically been dominated by boutiques like Evercore Inc. and Campbell Lutyens, but no longer. Citigroup has worked on the transactions since 2017 and now has a 17-person team, according to Anthony Diamandakis, global co-head of asset managers.

BC Partners recently decided to postpone a listing of academic publisher Springer Nature, which could have been Germany’s biggest IPO in more than a year, Bloomberg News reported this month. It also considered a potential GP-led deal for the investment, people with knowledge of the matter said. A spokesperson for BC Partners declined to comment.

Rarely used until about a decade ago, the value of GP-led deals surged to a record $26 billion last year. Since the pandemic upended markets, managers who wouldn’t normally talk to secondaries experts are interested, said Gabriel Boghossian, partner in the private equity team at Stephenson Harwood. He even interrupted a holiday to work on three such deals.

The growth in demand points to booming interest in the broader secondaries market, where some $80 billion of fund assets were traded in 2019, according to Evercore. Some of the biggest private equity players in the space include Ardian, which raised an industry record $19 billion fund in June, and Coller Capital, which has this year been raising money for its latest flagship secondaries fund.

While the virus spurred GP-led exits to account for a record 41% of the secondaries market in the first half of this year, their volumes plummeted in line with industry activity. The number of all types of completed sales by private equity firms fell to the lowest in five years in the period, according to data compiled by Bloomberg.

U.S. private equity firm GCM Grosvenor last month said it expects GP-led deals to return to record volumes in the next couple of years as pent-up demand and less transactions in underlying portfolios send firms into the secondary market.

But as a portion of the wider market, this year could prove the strategy’s most popular yet. The deals are on track to make up 50% of all secondaries transactions by year-end, compared with 33% in 2019, said Nigel Dawn, global head of private equity advisory at Evercore, which advises on the transactions.

“Managers are saying ‘we need more time’,” said Dawn.

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Jobless claims remain at historically high levels

EconOct 08. 2020

By The Washington Post · Eli Rosenberg · NATIONAL, BUSINESS, US-GLOBAL-MARKETS 
The number of new claims filed for unemployed remained at historically high levels, according to data released Thursday by the Department of Labor.

The number of initial claims inched down – from 849,000 to 840,000 last week. The number of new claims for gig and self-employed workers dropped from about 650,000 to 460,000.

All told, about 25.5 million people are collecting some kind of unemployment insurance. The number of jobless claims have fallen from their peak in the spring, but the rate has slowed in recent months.

“The story is, we’ve hit a plateau in unemployment claims,” said Robert Frick, corporate economist at Navy Federal Credit Union. “That is going to hurt the jobless rate and lead to more people eventually leaving the labor force.”

The numbers come in the final weeks before the presidential election on Nov. 3. President Trump has touted the fact that some of the labor market’s indicators from the worst of the coronavirus pandemic have improved, such as the unemployment rate.

Yet unemployment claims remain above the pre-pandemic record of 695,000 a week.

Frick said that the high level of jobless claims continuing more than six months into the pandemic was a bad sign for the economic recovery.

“We’ve been here so long, and I’m not seeing the kind of job creation that would lead us to believe that these claims are going to fall,” he said.

Economists, as well as Federal Reserve policymakers, have been warning the recovery could deteriorate without further aid from Washington for struggling businesses and households.