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Oil from Russia to U.S. Gets snapped up in Asia buying binge

EconNov 18. 2020Oil pumping jacks stand in an oil field in Almetyevsk, Russia, on Oct. 19, 2020. MUST CREDIT: Bloomberg photo by Andrey Rudakov. 

By Syndication Washington Post, Bloomberg · Serene Cheong, Sharon Cho · BUSINESS, US-GLOBAL-MARKETS

Physical cargoes of crude oil from Russia, the U.S. and the Middle East were getting snapped up at higher prices as buyers across Asia entered a bidding war to secure supplies.

January shipments of Russian ESPO, a favorite among Chinese and Japanese refiners, were sold at a five-month high premium over Dubai prices after spot differentials for Sokol rose $1 a barrel. In the Middle East, Chinese buyers were seen buying grades such as Das at a premium to its official price, even though the light-sour variety is typically not popular among the nation’s processors.

Buying interest across Asia has been strong after some refiners obtained less oil than usual in term supply contracts from OPEC producers such as Saudi Aramco and Iraq’s SOMO. Chinese demand also grew after private refiners received crude-import quotas that were 20% larger than last year’s concession.

Traders also said Chinese importers were on a buying spree for grades from other producers including Brazil and Angola, paying for cargoes that would arrive before mid-February’s Lunar New Year holidays. Barrels from the West African country have been selling more quickly in recent weeks, leading to December differentials strengthening by 40 to 60 cents a barrel compared with November.

More Chinese spot purchases are likely this week after a unit of Rongsheng released a tender to purchase crude for delivery to Zhoushan in February. Last month, the company surprised traders by purchasing millions of barrels of oil as it prepared to double its crude-processing capacity.

Other processors and trading houses in Japan and South Korea were also picking up cargoes from Qatar and even as far away as U.S., as Asia acted as a bulwark against faltering oil demand in Europe and the Americas.

Outside of North Asia, oil demand also strengthened in India, where refineries have been running at capacity since the first week of November. Petroleum consumption in the South Asian nation saw its first year-on-year increase last month, proving that the fuel guzzler was back on its feet despite rising coronavirus cases.

Refiners including Indian Oil have increased purchases of Nigerian crude this month for loading in December and January, according to traders of West African grades.

Even North Sea crudes, which have been lagging behind other markets, have shown flickers of a recovery. A 2-million-barrel carrying supertanker is now sailing toward Ningbo in China, having floated for a month off the off the U.K. coast. Mercuria Energy Group, one of the world’s top oil traders, was bidding for multiple North Sea grades on Monday in a pricing window run by S&P Global Platts. In recent months, the window has been dominated by sellers.

Caspian CPC Blend, which is rich in naphtha that’s used to make plastics, has also seen growing interest from Asian refineries. At least 7 million barrels for December loading have been sold to India, China and South Korea, compared with about 5 million for November, according to traders. Boosted by the strong Asian demand, CPC Blend was recently sold at about 75 cents a barrel less than Dated Brent, the highest price in five months.

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China’s yuan jumps to strongest since 2018 as optimism prevails

EconNov 18. 2020

By Syndication Washington Post, Bloomberg · Tian Chen · BUSINESS

China’s yuan climbed to the strongest level in more than two years, fueled by optimism on the country’s economic recovery and its interest-rate premium over the rest of the world.

The yuan jumped as much as 0.5% to 6.55 a dollar, surpassing the high it reached earlier this month when Joe Biden won the U.S. presidential election. The currency is set to climb for a fourth session, pushing a measure of its relative strength past a level that signals to some investors an asset is overbought.

Apart from friendlier ties between Washington and Beijing, the currency is also climbing on bets the nation’s rebound from the pandemic is well on track. The premium that Chinese government bonds offer over American debt is near the highest on record, which attracts foreign inflows and supports the yuan. A weak dollar provides yet another boost.

“China will likely lead in terms of the macro economic recovery around the world in the coming six months, so its yield advantage will remain intact and the currency will keep rallying,” said Stephen Chiu, a strategist at Bloomberg Intelligence.

The currency is on course to advance for a sixth month in November, the longest rally since 2014. The yuan has jumped 9.4% since late May, wiping out more than half of the decline since a range of disputes between China and the U.S. on issues from trade to intellectual property protection kicked off, sending the currency to the weakest in a decade.

The recent rally has opened a window for policymakers to reform the foreign-exchange market, with Beijing moving to relax capital curbs and loosen controls on the fixing last month.

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Stocks ease off record highs with virus in focus

EconNov 18. 2020

By Syndication Washington Post, Bloomberg · Claire Ballentine · BUSINESS

Stocks pulled back from record highs as investor focus turned to the surge in virus cases and new lockdown measures, overshadowing optimism that covid-19 vaccines will eventually end the pandemic.

Pharmacy chains were among the worst performers on the S&P 500 Index after Amazon.com Inc. unveiled a new push into prescription drugs. Tesla Inc. jumped on news the carmaker will join the benchmark U.S. gauge. Treasury yields dipped along with the dollar as Federal Reserve Chair Jerome Powell said the U.S. economy still has a “long way to go” before it fully recovers from the pandemic.

Investors are taking a pause after sending stocks to all-time highs Monday in the wake of news that Moderna Inc.’s vaccine was shown to be 94.5% effective in a clinical trial. Wide distribution of a shot is still months away, and cases are spreading quickly in the U.S. and Europe. Chancellor Angela Merkel warned that the situation in Germany remains “very serious,” while Ohio, Illinois and Pennsylvania announced new restrictions tied to the virus.

“Markets find themselves in a seemingly awkward moment as they attempt to weigh the near-term covid trends and the potential for a very tough few months for the economy against the optimism and progress around vaccine development,” said Yousef Abbasi, global market strategist at StoneX.

Elsewhere, Asian stocks were slightly higher. In Europe, travel and leisure companies led declines as more lockdown rules were announced. The pound rose on signs the U.K. and European Union are nearing a breakthrough on Brexit as early next week.

These are the main moves in markets:

Stocks

– The S&P 500 Index fell 0.5% as of 4 p.m. EST.

– The Stoxx Europe 600 Index declined 0.2%.

– The MSCI Asia Pacific Index climbed 0.2%.

– The MSCI Emerging Market Index fell 0.1%.

Currencies

– The Bloomberg Dollar Spot Index decreased 0.2%.

– The euro increased 0.1% to $1.1864.

– The British pound advanced 0.4% to $1.3251.

– The Japanese yen strengthened 0.4% to 104.2 per dollar.

Bonds

– The yield on 10-year Treasurys sank four basis points to 0.87%.

– Germany’s 10-year yield declined two basis points to -0.56%.

– Britain’s 10-year yield fell two basis points to 0.32%.

Commodities

– West Texas Intermediate crude rose 0.1% to $41.38 a barrel.

– Gold fell 0.4% to $1,881.34 an ounce.

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Thai auto production set to roar past annual target with 1.42m units

EconNov 18. 2020

By The Nation

The country is expected to produce 1.42 million cars this year, exceeding the target by 20,000 units, according to the Federation of Thai Industries’ Automotive Industry Club.

Production for domestic sales is also set to meet the target of 700,000 and climb as high as 720,000, said club vice president and spokesman Surapong Pisitpattanapong.

He attributed the high sales to Thailand’s success in curbing the Covid-19 pandemic, resulting in a speedy economic recovery.

Production for exports is also expected to meet the 700,000 target, as long as there is no severe second wave of the outbreak in Europe.

Total production in October was 149,360 units, down only 2.24 per cent year on year.

Production for domestic sales, which accounts for more than half of total production, rose 18.81 per cent year on year to 82,157. The figure reflects growth for two consecutive months.

Production for export in October dropped 19.65 per cent to 67,203 units.

The export value for finished vehicles, including auto parts, spare parts, and motorcycles and spare parts, was just over Bt65 billion, a drop of 6.7 per cent year on year. The export value from January-October was Bt520.555 billion, a fall of 28.87 per cent year on year.

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Baht appreciation expected to be shortlived

EconNov 18. 2020Deputy PM Supattanapong Punmeechaow 

By The Nation

The Thai currency will only strengthen for a short period as foreign investors are flocking to the markets, including Thailand, to seek profits at the end of the year, Deputy PM Supattanapong Punmeechaow said.

He added that the Bank of Thailand was closely monitoring the situation.

Meanwhile, the Federation of Thai Industries chairman Supant Mongkolsutree said the baht has risen 8.2 per cent since April this year to around Bt30.34 against the US dollar.

He added that the baht appreciated more than the Vietnamese dong, which means exports from Thailand are more expensive that those from its main competitor.

He said the baht has risen by 10 per cent if counting back from March this year, when it was Bt33 against the greenback.

Supant believes the most appropriate value for the baht should be Bt32 to the dollar.

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THBFIX-linked financial products no longer issued from July next year: BOT 

EconNov 18. 2020

By The Nation

From July 2021, all financial institutions will stop offering new loans and debt securities which reference the Thai Baht Interest Rate Fixing (THBFIX), the Bank of Thailand (BOT) announced on Tuesday. The move was spurred by the scheduled cessation on December 31, 2021, of the London Interbank Offered Rate (LIBOR), which is used to calculate the THBFIX. 

The BOT and a committee on banks’ preparedness for LIBOR cessation agreed that the move was necessary in order to limit the amount of THBFIX exposure, thereby reducing risks associated with the LIBOR transition. 

New financial products can switch to the new interest rate benchmark, the Thai Overnight Repurchase Rate (THOR) which the committee and BOT have developed as an alternative.

The BOT said after THBFIX is discontinued, it will publish a Fallback Rate (THBFIX) to be used for THBFIX legacy contracts until end-2024. It should become obsolete as THOR-referencing products should be widely available in the market by then.

Market participants can find additional details on the preparation for LIBOR cessation at https://www.bot.or.th.

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BOT ponders ‘debt warehousing’ to help creditors, debtors through virus crisis

EconNov 18. 2020BOT Deputy Governor Ronadol Numnonda 

By The Nation

The Bank of Thailand (BOT) is consulting with capital market agencies, the Thai Bankers’ Association and private funds on a new initiative to manage debt.

The idea is to create a “debt warehousing” fund to manage debts owed to financial institutions, BOT Deputy Governor Ronadol Numnonda explained.

The aim is to limit the damage from borrowers unable to make repayments due to the impact of Covid-19.

Their debt will be “warehoused”, or suspended until the virus situation improves, when debtors will be able to buy back their debt and businesses, he said.

The scheme would incorporate a guarantee facility and mechanism to ensure debtors were not forced to sell assets at unreasonably low prices, as happened during the 1997 financial crisis. Under the new scheme, both creditor and debtor would have to agree on prices of any assets sold to pay off the debt, according to Ronadol. 

The new scheme is expected to be ready by the end of this year, once participants source the necessary funding. The BOT or bodies such as asset management companies might take the leading role in setting up debt warehousing, he added.

Thailand’s small businesses have suffered severe impacts from the pandemic. Despite signs of recovery, those in the tourism sector continue to suffer as countries around the world impose new lockdowns. However, hopes for the tourism industry were given a boost in recent days by Pfizer and Moderna’s breakthroughs in vaccine development.

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Goldbugs advised to gorge while Fed keeps rate low

EconNov 18. 2020Teerarat Chutawarakul 

By The Nation

Investors eyeing gold should also keep a close watch on US monetary policies, an expert said on Monday.

Along with supply and demand, the US Federal Reserve’s policies are the main factors driving volatility in the gold price, InterGOLD Gold Trade’s managing director Teerarat Chutawarakul commented.

He cautioned that gold was similar to stocks in that it was difficult to predict when prices were cheap or at what point investing in gold would generate the best returns.

“The short-term gold price will be affected by various factors, including the Covid-19 outbreak, moves by outgoing US President Donald Trump, and new economic data. However, demand and supply for gold, as well as the Fed’s monetary policies, are the main factors underpinning the gold price in the long term,” he said.

He advised investors to monitor Fed policy since the global market uses dollars to trade gold, while the gold price tends to rise when the dollar weakens and fall when it strengthens.

“Meanwhile, the dollar weakens when the Fed cuts interest rates or injects cash into the economic system, and it strengthens when the Fed raises the rate or removes cash from the system,” he explained.

In current conditions, he expects the gold price to remain in positive territory since the Fed is injecting cash into the system and will keep its interest rate low for up to two years.

“Therefore, this is a good time to consider investing in gold,” he concluded.

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SET drops despite good news over Covid-19 vaccine

EconNov 17. 2020

By The Nation

The Stock Exchange of Thailand (SET) Index closed at 1,349.81 on Tuesday, down 1.25 points or 0.09 per cent. The volume of total transactions was Bt90 billion with an index high of 1,365.91 and a low of 1,344.55.

During the morning session, an analyst at Krungsri Securities said expected the day’s index to rise over positive news of Moderna’s Covid-19 vaccine found to be nearly 95 per cent effective in a preliminary analysis.

However, there is limited room for SET to rise due to the ongoing political unrest, he said, adding that the index would move between 1,345 and 1,360 points.

The top 10 stocks with the highest trade value today were STGT, KBANK, MINT, SCGP, AOT, BDMS, PTT, ADVANC, GPSC and PTTEP.

As of 4.30pm, the price of oil rose by US$0.12 or 0.29 per cent to $41.46 per barrel, while gold rose by $2.30 or 0.12 per cent, to $1,890.10 per ounce.

Other Asian indices were mixed:

Japan’s Nikkei Index closed at 26,014.62, up 107.69 points or 0.42 per cent.

China’s Shanghai SE Composite Index closed at 3,339.90, down 7.07 points or 0.21 per cent, while Shenzhen SE Component Index closed at 13,732.52, down 118.31 points or 0.85 per cent.

Hong Kong’s Hang Seng Index closed at 26,415.09, up 33.42 points or 0.13 per cent.

South Korea’s KOSPI Index closed at 2,539.15, down 3.88 points or 0.15 per cent.

Taiwan’s TAIEX Index closed at 13,593.01, up 41.18 points or 0.30 per cent.

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SET rises on hopes of Covid-19 vaccine, but political tensions casts a shadow

EconNov 17. 2020

By The Nation

The Stock Exchange of Thailand (SET) Index rose by 3.21 points, or 0.24 per cent, to 1,354.27 in the morning session on Tuesday.

An analyst at Krungsri Securities expected the day’s index to rise over positive news of Moderna’s Covid-19 vaccine found to be nearly 95 percent effective in a preliminary analysis.

However, there is limited upside room for the SET due to the country’s political unrest, he said, adding that the index would move between 1,345 and 1,360 points.

He suggested that investors buy BEM, BTS, GPSC, PSH, ROJNA and SIRI whose third-quarter performance were expected to improve.

The SET Index closed at 1,351.06 on Monday, up 4.59 points or 0.34 per cent. The volume of total transactions was Bt78.50 billion with an index high of 1,365.87 and a low of 1,351.04.