The private sector is worried that renewed lockdowns in Europe could see the Thai economy shrink by another 0.37 to 0.5 per cent in the fourth quarter, according to the Joint Standing Committee on Commerce, Industry and Banking on Wednesday.
Committee chairman Karin Sarasin said the lockdowns could affect Thai exports by restricting foreign consumers’ activities but would not impact manufacturing.
However, the Thai economy would continue to recover in the fourth quarter provided there was no second wave of Covid-19 in Thailand and recent government stimulus measures began to take effect, he said.
The joint committee meeting found that the Thai economy in the third quarter benefited from the recovery of manufacturing overseas, while domestically businesses such as auto parts, computers and plastic pellets also bounced back.
The joint committee forecast that Thai economy this year will contract between 7 and 9 per cent, while export will shrink by 8-10 per cent.
This week the Thai National Shippers’ Council brightened its forecast for export contraction this year from 8-10 per cent to 7 per cent after seeing an improvement in global grade.
However, despite rising orders, the council is keeping a close watch for a possible second wave of Covid-19 infections in export destinations, especially the US and Europe.
Thai exports dropped 3.86 per cent year on year in September to US$19.621 billion, while exports in the first nine months of the year fell 7.33 per cent year on year to $172.996 billion.
The Stock Exchange of Thailand (SET) Index closed at 1,222.44 on Wednesday, up 1.11 points or 0.09 per cent. Total transactions amounted to Bt49.80 billion with an index high of 1,231.05 and a low of 1,214.49.
In the morning session, an analyst at Krungsri Securities expected the day’s index to hit 1,230 points on hopes that Joe Biden would win the US presidential election, rollout of US economic stimulus, and the rising oil price.
“However, investors should beware of market volatility and mass sell-offs in line with technical indicators,” he said.
The 10 stocks with the highest trade value today were CPALL, PTT, KBANK, DELTA, IVL, SCGP, AOT, PTTEP, ADVANC and HANA.
As of 4.30pm, the price of oil rose by US$0.61 or 1.62 per cent to $38.27 per barrel, while gold dropped by $16.40 or 0.86 per cent, to $1,894 per ounce.
Other Asian indices were on the rise except for Hong Kong stock index:
Japan’s Nikkei Index closed at 23,695.23, up 399.75 points or 1.72 per cent.
China’s Shang Hai SE Composite Index closed at 3,277.44, up 6.37 points or 0.19 per cent, while Shenzhen SE Component Index closed at 13,659.50, up 79.46 points or 0.59 per cent.
Hong Kong’s Hang Seng Index closed at 24,886.14, down 53.59 points or 0.21 per cent.
South Korea’s KOSPI Index closed at 2,357.32, up 14.01 points or 0.60 per cent.
Taiwan’s TAIEX Index closed at 12,867.90, up 131.89 points or 1.04 per cent.
Charoen Pokphand Foods (CPF) is ready to penetrate Malaysia’s retail market despite not yet receiving approval from Thailand’s Trade Competition Commission for its acquisition of Tesco-Lotus’s businesses in Thailand and Malaysia.
CP already operates the 7-Eleven chain and Makro stores in Thailand, which has triggered worries of a retail monopoly.
In March, Charoen Pokphand (CP) informed the Stock Exchange of Thailand it had acquired shares in Tesco Stores in both countries.
The share purchases, which allow CP to acquire assets worth Bt338.445 billion, are subject to approval by Thailand’s TCC and Malaysia’s Domestic Trade and Consumers Affairs Ministry, respectively.
Prasit Boondoungprasert, CEO of CPF, said the company’s strategy next year will focus on expanding market channels via Tesco Lotus in Thailand and Malaysia. He expects the TCC to conclude this issue soon.
“CPF is ready to penetrate the Malaysian market … because the company does not have suppliers in Malaysia,” he said.
He added that the opening of Singapore’s market was also dependent on the TCC’s decision.
“Singapore has had to order chicken from Thailand instead of Malaysia because the Covid-19 outbreak has disrupted the transportation system,” he explained.
He said the company’s online systems to cope with the Covid-19 impact had also helped boost internet sales and reduce operating costs.
“However, the company will pay attention to producing healthy food as the Covid-19 outbreak has triggered public concern about health,” he said.
He expected CPF business turnover this year to hit Bt540 billion, up 8 per cent year on year, boosted by overseas operations.
“Most of the revenue came from our companies in China and Vietnam after the African Swine Fever outbreak helped boost the price of pork,” he said.
He added that the revenue from CP’s Vietnam operation is expected to rise further as it exports chicken to Japan with tariff privileges under the two countries’ trade deal.
By Syndication Washington Post, Bloomberg · Matthew Martin, Anthony Di Paola · BUSINESS Saudi Aramco failed to generate enough cash to cover its dividend, yet left the payout unchanged at $18.75 billion for the third quarter even as profit fell 45% and debt continued to rise.
The Saudi Arabian state energy firm’s free cash flow was $12.4 billion between July and September, compared with $20.6 billion a year earlier. Gearing climbed to 21.8% from 20% in June and from minus 5% in March, when Aramco had more cash than debt.
Aramco’s dividends are a vital source of cash for the Saudi government, whose budget deficit is expected to widen to 12% of gross domestic product this year amid a coronavirus-triggered crash in crude prices and a severe economic contraction.
Yet the company, 98% owned by the government, probably won’t be able to continue paying out such high dividends unless oil prices, down 40% in 2020, rise, Moody’s Investors Service said last month. Aramco’s total payments to the kingdom, including dividends, taxes and royalties, fell 30% in the three months to the end of September to $24.6 billion.
“Aramco covered the lion’s share of its dividend this quarter, which, given the macro environment at $42 a barrel and abysmal refining margins, is quite an accomplishment,” Royal Bank of Canada analyst Biraj Borkhataria said in a research note.
Net income at the world’s biggest oil company was 44.2 billion riyals ($11.8 billion), slightly ahead of analysts’ expectations.
Aramco’s shares rose 1.3% to 34.60 riyals by 12.37 p.m. in Riyadh, paring this year’s drop to 1.8%. The stock has been bolstered by management’s pledge to pay a $75 billion dividend annually for five years after the completion of last December’s initial public offering.
That promise, combined with a $69 billion acquisition of chemicals maker Saudi Basic Industries Corp., has seen debt levels balloon even with Aramco cutting capital expenditure and laying-off hundreds of foreign workers. Net debt rose $6 billion to $83 billion by the end of the third quarter, putting the company even further from its gearing target of between 5% and 15%.
The company may have to take on more debt to fund the dividend payments given its slumping cash flow. It drew down a $10 billion loan in late July. That revolving credit facility matures in May 2021, but Aramco can extend it for another year.
Income still increased for the first time in five quarters as oil prices steadied following their battering earlier in the year as the coronavirus spread globally and demand for energy cratered.
“We saw early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets,” Chief Executive Officer Amin Nasser said. “We continue to adopt a disciplined and flexible approach to capital allocation in the face of market volatility.”
Although the results suggest the worst of the pandemic’s impact on energy demand may have passed, Aramco still faces a brittle market. Oil prices fell to a five-month low this week amid fresh travel restrictions in Europe aimed at stemming a surge in virus cases.
OPEC and allied producers — who agreed to slash crude exports in April — are weighing whether to delay an easing of those curbs to buttress crude prices.
In addition to crushing demand for fuel, the pandemic has also hit Aramco’s refining and chemicals businesses. The downstream unit swung to a $795 million loss before interest and taxes in the third quarter from an $801 million profit a year earlier.
Aramco had gross refining capacity of 6.4 million barrels a day at the end of September. It’s seeking to cement its position as one of the world’s biggest crude processors by having the capacity to turn some 8 million to 10 million barrels a day into fuels such as gasoline and diesel.
The price of gold rose by Bt100 per baht weight in morning trade on Wednesday, the Gold Traders Association reported.
As of 9.22am, the buying price of a gold bar was Bt27,900 per baht weight and selling price Bt28,000, while gold ornaments cost Bt27,394.12 and Bt28,500, respectively.
At close on Tuesday, the buying price of a gold bar was Bt27,800 per baht weight and selling price Bt27,900, while gold ornaments cost Bt27,303.16 and Bt28,400, respectively.
The spot gold price moved to US$1,901 (Bt59,216) per ounce in the morning after the price rose by $17.90 to $1,910.40 per ounce at close on Tuesday from a weakening dollar and mass buy ups in the precious metal before announcement of the US presidential result.
The Hong Kong gold price meanwhile rose by HK$110 to $17,630 (Bt70,844) per tael, the Chinese Gold and Silver Exchange Society reported.
The Stock Exchange of Thailand (SET) Index rose by 7.41 points, or 0.61 per cent, to 1,228.74 in the morning session on Wednesday.
An analyst at Krungsri Securities expected the day’s index to hit 1,230 points before falling on hopes that former vice president Joe Biden will win the US presidential election, as well as the rollout of US economic stimulus measures after the election and the rising oil price.
“However, investors should beware of market volatility and mass sell-offs in stocks in line with technical indicators,” he said.
He recommended investors buy:
> PTTGC, IVL and Top that benefit from the rising oil price.
> TU, STGT, STA, CBG, IVL, EPG, AP, Com7, Synex, Asian, Hana, SVI and TVO, whose third-quarter performance is expected to improve.
The SET Index closed at 1,221.33 on Tuesday, up 19.17 points, or 1.59 per cent. The volume of total transactions stood at Bt45 billion, with an index high of 1,222.78 points and a low of 1,209.90.
By Syndication Washington Post, Bloomberg · Claire Ballentine, Kamaron Leach · BUSINESS
U.S. stocks capped the biggest two-day rally since September, led by a surge in bank shares as Treasury yields spiked on speculation that Congress will deliver a spending bill once the election is decided. The dollar weakened and crude oil increased the most in almost a month.
The S&P 500 climbed 1.8%, bringing the two-day increase to 3.2%. Financial firms rallied 2.2%, also the most since September. Democratic nominee Joe Biden leads President Donald Trump in the final polls, with some investors speculating his victory would bring a surge in federal spending. Meanwhile, Alibaba Group Holding Ltd.’s U.S.-traded shares tumbled 8.1% after China halted the initial public offering of Ant Group Co., in which Alibaba owns about a one-third stake.
Treasurys fell and a gauge of the dollar dropped the most in more than three weeks as a risk-on mood prevailed. Oil extended gains after jumping on Monday on increasing signs OPEC+ will delay a planned easing of output cuts.
“It’s a reflection of the market’s belief there is not going to be a whole lot of uncertainty after election day,” said Matt Stucky, portfolio manager for equities at Northwestern Mutual Wealth Management Co. “The worst outcome for election day is a really uncertain winner scenario where it’s going to take weeks and a lot of legal back and forth before the decision is ultimately made.”
While trades reflecting a Democratic sweep held firm, betting markets aren’t convinced. One gauge slipped to just over 50% odds of the so-called Blue Wave — that Democrats oust President Trump and take Congressional majorities. Traders hedged prospects of post-vote volatility, driving a measure of expected swings in China’s yuan to its highest level in more than nine years.
“The ghost of 2016, from both polling and market expectations, looms large,” Michael Purves, chief executive officer of Tallbacken Capital Advisors, wrote in a note.
Elsewhere, the benchmark credit derivatives index measuring the perceived risk of U.S. high-yield companies gained by the most in almost two months, implying lower probability of default.
Markets are reflecting more optimism following weeks of speculation that a contested election outcome may produce no clear winner for some time and roil markets. Polls continue to indicate that Biden is ahead, though the race looks tight in some battleground states, some of which are seeing virus cases soar.
“The market’s upward bias, and underlying leadership of energy, industrials, and materials sectors, imply a Blue wave that incorporates the potential for the passage of stimulus and infrastructure spending bills,” said Sam Stovall, chief investment strategist at CFRA Research.
In Europe, mining shares climbed, helped by the slumping dollar. Banks rallied after BNP Paribas SA joined its European peers in posting lower-than-expected bad-loan provisions from the pandemic.
These are some of the main moves in financial markets:
Stocks
The S&P 500 Index jumped 1.8% to 3,369.16 as of 4:05 p.m. EST, the highest in a week on the largest surge in more than four weeks.
The Dow Jones industrial average surged 2.1% to 27,480.03, the highest in more than a week on the biggest jump in 16 weeks.
The Nasdaq Composite Index increased 1.9% to 11,160.57, the largest climb in more than three weeks.
The MSCI All-Country World Index surged 1.8% to 567.82, the highest in a week on the biggest jump in almost four months.
Currencies
The Bloomberg Dollar Spot Index decreased 0.5% to 1,166.86, hitting the lowest in a week with the first retreat in a week and the largest dip in more than three weeks.
The euro climbed 0.6% to $1.1713, the first advance in more than a week and the biggest increase in five weeks.
The Japanese yen strengthened 0.2% to 104.55 per dollar, the largest gain in a week.
Bonds
The yield on 10-year Treasurys climbed four basis points to 0.89%, the highest in five months.
The yield on 30-year Treasurys increased five basis points to 1.66%, the highest in more than a week.
Germany’s 10-year yield gained two basis points to -0.62%, the highest in a week on the biggest rise in more than a week.
Commodities
West Texas Intermediate crude climbed 2.8% to $37.83 a barrel, the highest in a week.
Gold strengthened 0.6% to $1,907.13 an ounce, the highest in a week.
By The Washington Post · Taylor Telford · BUSINESS, US-GLOBAL-MARKETS U.S. markets jumped at the open on Election Day, as investors expressed optimism that a clear winner would emerge in the presidential race, fanning hopes for economic stimulus.
Tumult reigned in trading last week, with U.S. indexes notching their worst week since March as the U.S. shattered records for new coronavirus cases and several European nations reintroduced lockdowns. But on Tuesday, the markets are poised to build on Monday’s gains, as upbeat investors react to projections of a Blue Wave, Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said in comments emailed to The Post.
“Currently the consensus is that a Blue Wave (Democrats hold the House and win the Senate and White House) scenario will lead to a much larger stimulus package next year,” Zaccarelli wrote, “which would be good for the stock market in the short run, despite the fact that it will also lead to higher corporate and personal income taxes.”
For the first time in history, most Americans cast their ballots before Election Day. The massive increase in early and mail voting, with many voters seeking to avoid crowded polling places, has reshaped how and when most ballots are counted, creating uncertainty around when results will be known. According to The Washington Post’s average of national polls, Democratic nominee Joe Biden leads President Trump 52% to 42%. The former vice president holds a bigger lead than Hillary Clinton had in 2016, before her surprise loss to Trump.
Shortly after open, the Dow Jones industrial average was up more than 650 points, or 2.4%, at 27,581. The S&P 500 index had risen 2.2% to 3,383. The tech-heavy Nasdaq 100 – battered by the recent steep sell-offs in Big Tech – rose 2.0% to 11,180.
The optimism was shared overseas. Asian markets all closed in positive territory, with Hong Kong’s Hang Seng Index and the Australian ASX 200 both gaining nearly 2%. Japan’s Nikkei 225 and the Shanghai Composite index both climbed about 1.4%. In midday trading, European indices were all positive, led by France’s CAC and Britain’s FTSE 100, which were both up 2.1%.
“It’s a firm risk-on mood for investors as equities rise across Europe and Asia,” Russ Mould, investment director at AJ Bell, said in Tuesday comments emailed to The Post. “Investors seem to be pricing in a victory by Joe Biden in the US Presidential Election and anticipation is high that he will have a more favorable trade policy with China and the EU.”
Investor ease was reflected in the yield on the 10-year U.S. Treasury note, which edged up to 0.878% Tuesday morning, nearing its highest level since June as investors seek out riskier territory. Bond yields move inversely to prices.
Even oil markets, which have been choppy as renewed movement restrictions spur fears of wider lockdowns, were steady Tuesday. Brent crude, the international oil benchmark, was trading up 3.2% at $40.23 per barrel. West Texas Intermediate crude, the U.S. oil benchmark, was trading up 3.6% at $38.13 per barrel.
The rally reflects a hunger for change amid the ongoing public health crisis and the uneven economic recovery, Chris Rupkey, chief financial economist at MUFG Union Bank, said Tuesday in comments emailed to The Post.
“History is repeating itself where four years ago, the Dow industrials rallied Monday and Tuesday into the presidential election on November 8, and now stocks are up Monday and Tuesday again this year before the election results start to trickle out after the close of trading today,” Rupkey wrote. “Stocks are rallying today in hopes of a better tomorrow.”
On Sunday, the U.S. Centers for Disease Control and Prevention published guidance saying people who are in isolation after testing positive can still cast ballots in person.
“Voters have the right to vote, regardless of whether they are sick or in quarantine,” the CDC says on their website. Under federal law, turning someone away from a polling site is considered illegal and an act of voter intimidation.
The guideline could add another layer of tension for those voting in person on Election Day, as some states prepare the National Guard for potential post-election unrest. The surge of voters to the polls Tuesday comes amid what one top health official called “the most concerning and most deadly phase” of a the coronavirus pandemic. The virus has already claimed at least 230,000 American lives, and record numbers of coronavirus-related hospitalizations are straining hospitals in rural states.
By Syndication Washington Post, Bloomberg · Jana Randow · BUSINESS
German manufacturing drove Europe’s uneven recovery in October, a pickup that will almost certainly be derailed now by tough new restrictions to contain covid-19.
Last month saw a fourth consecutive increase in euro-area factory output, underpinned by stronger demand from within the region and beyond. Companies remained positive about future production, but still continued to cut staff.
“Euro-zone manufacturing boomed in October, with output and order books growing at rates rarely exceeded over the past two decades,” said Chris Williamson, an economist at IHS Markit. “While the data bode well for production during the fourth quarter, the expansion is worryingly uneven.”
Germany was the standout performer, benefiting from strong demand for cars, business equipment and machinery. Austria, Italy and Spain also saw solid expansions.
Manufacturing has been relatively resilient in the face of a resurgent pandemic. Reports out of Asia also painted a positive picture in October. Factory growth continued in China, with that economy’s ongoing recovery giving the rest of the region a lift.
Euro-area services, however, have struggled with hesitant consumers, and will see business deteriorate sharply in November when restaurants, hotels and shops will be closed in many parts of the continent.
The European Central Bank has already signaled that more monetary stimulus is on its way in December. Governments have also announced new support to help companies through the crisis and retain jobs, so that consumers can continue to spend.
“While manufacturing as a whole may be booming for now, the sustainability of the recovery will depend on household behavior returning to normal and labor markets strengthening,” said Williamson. “Given second waves of virus infections, this still looks some way off.”
By Syndication Washington Post, Bloomberg · Paul Gordon · BUSINESS
The European Central Bank’s exceptionally clear pledge to come up with a new package of monetary stimulus at its next policy meeting has given markets plenty to think about.
President Christine Lagarde was forthright last week in saying her institution will provide all the support needed for a euro-area economy that is again shutting down under the onslaught of the coronavirus.
But she was also insistent that simply doing more of the same is not the plan. To hammer home that message, she referred to the “recalibration” of the ECB’s measures 20 times in her one-hour news conference.
So financial professionals immediately got to work figuring out what that might entail.
– Bond Binge 1
Economists and investors are essentially unanimous on one thing: the 1.35 trillion-euro ($1.6 trillion) pandemic emergency purchase program will be expanded.
The powerful bond-buying plan — agreed at an extraordinary ECB meeting in March, and only half of which has so far been used — can crush signs of stress in government finances by buying up the debt of struggling nations.
JPMorgan Chase & Co., UBS AG and Barclays Plc all expect an extra 500 billion euros to be added. Morgan Stanley expects a little less, Commerzbank AG a little more. The general view is that the program will be extended by six months to the end of 2021.
The weekly pace of purchases could also be stepped up even before the meeting, according to Evercore ISI.
– Bond Binge 2
Some economists see a chance of another bond program being boosted as well — the asset purchase program that was launched in 2015 to fend off the risk of deflation. After a brief halt in 2019, it was resumed and is running at 20 billion euros a month, plus a “temporary envelope” of 120 billion euros. It’s currently scheduled to run until the end of this year.
ABN Amro Bank NV, Barclays and Pictet & Co. are among those saying the program will likely be extended into 2021 and stepped up — Pictet says it might be doubled to 40 billion euros a month.
A related, and much thornier, topic is whether the asset purchase program should be granted the type of flexibility used in the pandemic version.
Some ECB policymakers have pushed back against that idea. Executive Board member Yves Mersch said at a conference on Monday that the pandemic program is temporary and the asset purchase program will “not inherit” its features.
Pictet says it’s also possible the ECB could buy so-called fallen angels — securities that have seen their credit rating cut to below investment grade because of the crisis — in its private-debt programs. Junk bonds are currently ineligible.
– Bank Relief
The ECB is proud of its six-year-old innovation of giving banks cheap long-term loans to spur them to keep credit flowing, so economists widely expect that to be key to the December package.
More funding rounds are seen as likely, as only one is planned in 2021, perhaps with even looser terms. JPMorgan and others think three more operations will be added next year, and the terms adjusted so that it’s easier for banks to get the lowest interest rate of -1%.
JPMorgan says the standards on the collateral deemed acceptable for the loans could be loosened to make it easier for banks to access them.
Such generosity will feed into another tricky debate though — whether banks should be allowed to resume paying dividends.
– Rate-Cut Resistance
One change that looks less likely is the once-standard central bank tool of an interest-rate cut. The policy rate is already at a record-low -0.5% and hasn’t been reduced at all during the pandemic, for fear of crimping bank profitability to the point that they make credit harder to get.
Those concerns have been mitigated by some exemptions from the negative rate — which works as a charge on bank deposits — and by the long-term loan program. ABN Amro sees a strong case for exemptions to be increased.
Still, Austrian central-bank Governor Robert Holzmann said on Friday that he doesn’t see a rate reduction as being effective, and economists reckon many of his colleagues will agree. Commerzbank is among the few that sees action, saying the ECB will probably cut by 10 basis points in combination with other measures.
– December Tease
Holzmann was also keen to stress that policymakers will “perhaps have new instruments” — though he wouldn’t speculate on what they might be. Nor would his colleagues who spoke after Lagarde’s news conference.
One idea that surfaces occasionally, and has so far always been turned down, is to help strengthen banks by buying their debt. Patrick Perret-Green, head of research and strategy at AdMacro Ltd., says “it’s always struck me as strange that they’ll buy corporate paper and accept the credit risk but not that of banks.”
That still looks unlikely though. The ECB is also the supervisor for euro-area banks, and so risks running into a conflict of interest.
