Pyongyang test rattles traders, but SET advances

Pyongyang test rattles traders, but SET advances

Recap: Geopolitical tension has intensified following another North Korean missile launch over northern Japan yesterday in response to fresh UN Security Council sanctions. Investors are also awaiting next week's US Federal Reserve meeting. While no change is expected in the benchmark 1.25% interest rate, there could be some signals about the Fed's intentions to start selling down some of its holdings.

No significant domestic factors influenced trade on the SET, which nonetheless broke a 24-year high. The index moved between 1,634.12 and 1,662.64 points before closing yesterday at 1,660.53, up 1.5% from the previous week, in heavy turnover averaging 60.22 billion baht a day. Foreign investors were net buyers of 8.03 billion baht, while brokers bought 1.94 billion. Institutional investors sold 2.01 billion baht and retail investors were net sellers for a fifth consecutive week, at 7.96 billion baht.

Newsmakers: US economic growth will take a mild hit in the current quarter as a result of two severe storms, Harvey in Texas and Irma in Florida, according to the median forecast in a Reuters poll of 48 economists. It foresees a dip of 0.3 percentage points in seasonally adjusted annualised growth. But the outlook for the coming year remains steady, suggesting lost output will be recouped quickly.

The European Union is in its best economic shape in more than a decade and is ready to move on from Brexit, European Commission President Jean-Claude Juncker said on Wednesday. He said the 28-country bloc was "bouncing back" after a series of economic struggles following the recession of 2008-09, and despite the vote by Britain vote to leave.

China's economy lost momentum in August, with industrial output and retail sales growth slowing. Industrial output rose 6% from the same month of 2016, the National Bureau of Statistics said. Retail sales expanded 10.1%, the slowest monthly rate this year.

India is poised to become the first to import the iconic Shinkansen bullet-train technology from Japan after Taiwan, a highlight of the country's infrastructure upgrade programme. The Japanese government has also agreed to fund most of the US$17 billion needed for the project that will become part of Asia's oldest railway network.

The SET index on Wednesday rose to a 24-year high, buoyed by fund inflows from foreign investors and brokerage firms. Koraphat Vorachet, senior vice-president and head of investment research at Capital Nomura Securities, said stock performance would improve this quarter, especially for the consumer sector because of higher earnings from last year's low base, together with rising farm prices and accelerated public infrastructure spending.

The Finance Ministry is calling for the Bank of Thailand to cut its policy interest rate with the aim of countering hot money and curbing speculative inflows, but the central bank says a rate cut could put financial stability at risk.

The cabinet last Tuesday approved new excise tax rates for alcohol, cigarettes and playing cards, effective today.

The Finance Ministry is considering whether a capital-gains tax exemption for stock investors is still needed and will also review tax breaks in other sectors including farmers.

Central Group has joined with JD.com, China's largest retailer, and the Chinese fintech company JD Finance in announcing an aggregate investment of up to US$500 million to establish two joint ventures in Thailand covering e-commerce and fintech services.

Bangkok Expressway and Metro Plc (BEM), the operator of expressways and mass rapid transit (MRT), plans to buy 35 new electric trains for the second phase of its Blue Line extension. The company will buy the 35 trains from Siemens at a combined 20 billion baht. The first three trains will be delivered in late 2018, 15 trains in early 2019 and the remaining 17 at the end of 2019.

Coming up this week: China will release August housing prices today. Also due are euro zone inflation for August and the US housing market index. The euro zone current account for July and US trade data for August will be released tomorrow. Japan will release August trade data on Wednesday. The Fed will wrap up its two-day meeting with an announcement scheduled around 2am Thursday Thailand time.

Stocks to watch: Asia Plus Securities recommends increasing stock holdings from 50% to 60% of the portfolio, and has revised up its 12-month SET target to 1,766 points. Its top picks are THCOM, INTUCH, SCB, IRPC, PTTGC, PTT, HANA, GFPT, BEAUTY and WHA.

Bualuang Securities reports that EA and WORK will join the FTSE SET100 index and 17 listed firms will join the Dow Jones Sustainability Indices (DJSI) for 2017, effective from Monday. They include AOT, BANPU, CPF, CPN, IRPC, KBANK, MINT, PTT, PTTEP, PTTGC, SCC, TOP and TU, along with newcomers CPALL, HMPRO, IVL and TRUE. Thailand has the most listed companies in the DJSI among Asean peers.

Technical view: Tisco Securities sees support at 1,635 points and resistance at 1,680. DBS Vickers Securities sees support at 1,640 points and resistance at 1,680.

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