Recap: US and European stocks marched up last week with the Dow Jones and S&P hitting records as weak housing sales and manufacturing data suggested a delay in a Federal Reserve interest-rate increase. Most Asian markets retreated, especially in China, on worries over economic health of the world's second largest economy.
In Thailand, the SET managed to edge up despite a sell-off in banks on concerns over lower profitability after lending rate reductions and higher bad debts, as Krungthai Bank (KTB) set aside an additional 3.6 billion baht in provisions in April.
The SET Index moved in a narrow range of 1,505.67 and 1,530.85 points, and closed at 1,523.86, up 0.7% from the previous week, on average turnover of 39.24 billion baht a day. Foreign investors were net buyers of 4.22 billion baht and institutional investors were net sellers of 1.78 billion. Brokers cashed out 798.57 million baht and retail investors were net sellers of 5.2 billion.
Big movers: Global Power Synergy (GPSC), an electricity generating affiliate of PTT, fell 3.7% below its 27-baht IPO price on its first day of its trade last Monday.
Top loser SALEE shed 13.9% to 1.30 baht and top gainer KC rose 41.8% to 4 baht. POLAR led in volume, gaining 8% to 0.27 baht. Leading in turnover were PTT, unchanged at 361 baht; KBANK, down 3.85% to 200 baht; and KTB, down 6.5% to 18.60 baht.
Newsmakers: The US economy was on a modest growth path early in the second quarter despite weak home sales and manufacturing activity, although the labour market continued to tighten. Existing home sales declined 3.3% to an annual rate of 5.04 million units in May. The manufacturing PMI fell to 53.8 from 54.1 in April.
Federal Reserve officials believed it would be premature to raise interest rates in June even though most felt the US economy was set to rebound from a dismal start to the year, according to minutes from their April meeting.
Chinese factory activity contracted for a third month in May and output shrank at the fastest rate in 13 months. The preliminary HSBC/Markit PMI fell to 49.1.
Japan's economy expanded at its fastest pace in a year in the first quarter, a sign Japan is steadily emerging from last year's recession. GDP rose 2.4% year-on-year, beating a revised 1.1% expansion in the fourth quarter of 2014. Inflation remained subdued at 0.2% on lower energy costs, adding pressure on the Bank of Japan after two years of massive stimulus aimed at banishing deflation. However, the central bank said it believed the economy was on the upswing and no new measures would be needed.
Japan announced a plan to provide US$110 billion for Asean infrastructure projects, to be invested over five years. The sum is a 30% increase over Tokyo's past commitments and comes at a time where China is about to launch a new institutional lender.
The Thai economy grew 0.3% in the first quarter from the quarter before, and 3% year-on-year, The National Economic and Social Development Board reported. Consumption, government spending and private investment all grew but exports and consumer confidence declined. The NESDB cut its full-year growth forecast to 3-4% from an earlier range of 3.5% to 4.5%, and its export growth projection to 0.2% from 3.5%.
The Bank of Thailand said the current range of between 33.40 and 33.50 baht to the dollar was satisfactory, but that volatility would persist because of internal and external factors. Thai exporters should reap at least a 2% benefit from the weakening baht in terms of baht-denominated revenue, it said.
KBANK reduced its minimum lending rate (MLR) by 13 basis points to 6.5% from 6.63% and its minimum overdraft rate (MOR) to 7.37% from 7.5%. SCB trimmed its lending rates by 10-30 basis points. Its MRR is now 7.82%, MLR 6.525% and MOR 7.4%, effective today.
The extra 3.6-billion-baht provision set aside by Krungthai Bank (KTB) last month has fuelled investor worries over rising non-performing loans (NPLs) and a possible repeat of disappointing earnings this quarter.
Five candidates will vie to succeed outgoing Bank of Thailand governor Prasarn Trairatvorakul. They are Paiboon Kittisrikangwan, deputy governor for corporate support services and banknote management; Tongurai Limpiti, deputy governor for financial institution stability; Veerathai Santiprabhob, a member of the Monetary Policy Committee; Supavud Saicheua, managing director of Phatra Securities; and Kiatchai Sophastienphong, former director of monetary policy at the BoT.
The Finance Ministry is expected to approve 10 additional licences for nanofinance applicants.
SET-listed companies reported a combined net profit of 226.86 billion baht in the first quarter, up 1.89% from a year ago. Sales fell 10.83% to 2.51 trillion baht, reflecting low oil price. MAI-listed companies reported a 43.5% year-on-year increase in net profit to 2.35 billion baht, on sales of 30.12 billion, up 3.06% from a year ago.
HEMRAJ is maintaining its land sales target despite the lacklustre economy, and aims to sell 1,400 rai of land at its industrial estates this year, up from 665 rai in 2014. It sold 190 rai in the first quarter or 14% of its full-year target.
TSTH expects its sales to increase by 12% to 1.25 million tonnes in fiscal 2016 to March 31, and to 1.7 million tonnes within the next three years when its three steel plants in Thailand will reach their full capacity, spurred by infrastructure demand.
SIRI plans to launch 8 condominiums along mass-transit routes this year, worth a combined 21 billion baht, encouraged by low interest rates and state infrastructure plans. It targets sales revenue of 20 billion baht, supported by a backlog of 30 billion baht, of which 15 billion will be recognised his year
Coming up this week: Thai trade data for April and US pending home sales for April are due tomorrow.
The euro zone consumer confidence index for May will be released on Friday, along with monthly economic data from the Bank of Thailand.
Stocks to watch: KTB Securities recommends accumulating PTT and TOP as they will gain from rising oil prices. It also has buy recommendations for SAWAD, GL, ITD, PYLON, LH, SIRI and HMPRO as they benefit from interest rate cuts.
KGI Securities suggests accumulating ITD and TFD. Asia Plus has buy recommendations for RCL, VNG, TUF and IRPC on expectations of profit growth this year. Its stock picks for the week are TVO, ASK, BTS and VNG.
Technical view: