Emerging markets wobble as investors flock to us debt

RECAP: A rise in US Treasury yields to seven-year highs sparked selling in emerging markets after robust economic data and hawkish comments from Fed officials stoked concerns of a faster-than-expected pace of interest rate increases. Elsewhere, the Indian central bank’s surprise decision not to increase rates left investors uneasy.

  • The SET index moved in a range of 1,718.12 and 1,765.06 points before closing at 1,720.52, down 2% from the previous week, in turnover averaging 57.39 billion baht a day. Foreign investors were net sellers of 11.05 billion baht and institutions sold 8.6 billion worth of shares. Retail investors were net buyers oft 17.76 billion baht, with brokerage firms purchasing 1.9 billion. Newsmakers: The “horrible” North American Free Trade Agreement (Nafta), in Donald Trump’s view, is dead, replaced by the United States-Mexico-Canada Agreement (USMCA), which is almost exactly the same but for a few tweaks. The US president is crowing anyway because the new pact gives the US greater access to Canada’s dairy market. There are positive elements for the auto industry in all three countries including Canada, which finally agreed to terms this week. The deal governs more than US$1 trillion in trade.
  • Tencent Music has filed a Nasdaq listing application, planning what could be one of the biggest IPOs by a Chinese company in the US. The subsidiary of the web giant Tencent Holdings is expected to raise up to $2 billion.
  • After declaring last week that it could manage a deficit at 2.4% of GDP for the next three years, Italy’s populist government has trimmed the target to 2.2% in 2020 and 2% in 2021, bowing to pressure from Brussels, which was worried about overspending. Rosmah Mansor, the luxury-loving wife of former Malaysian prime minister Najib Razak, has pleaded not guilty to charges of money laundering and tax evasion, stemming from the investigation into the massive corruption scandal that led to her husband’s electoral defeat in May.
  • Elon Musk must step down as Tesla chairman for three years and pay a fine of $20 million after reaching a deal with the US Securities and Exchange Commission over his misleading tweets about taking the firm private. The SEC agreed to drop fraud charges against the belligerent inventor but is powerless to unplug his Twitter insult machine. On Thursday Mr Musk called the SEC the “Shortseller Enrichment Commission”.
  • The embattled US engineering giant General Electric removed its chief executive and warned it would fall short of its 2018 earnings targets as cash flow remains tight. The Bank of Thailand has moved to reduce property bubble risk by requiring buyers seeking mortgages of 10 million baht or more to come up with 20% down payments first. Foreign net holdings of Thai bonds are forecast to reach a record 1 trillion baht this year based on steady capital inflows as they are considered a safe haven investment, says Kasikornbank.
  • Retail investors who subscribe to units of the Thailand Future Fund (TFF) will get rights for the first allotment for a 10,000baht investment, a move meant to attract as many individual investors as possible. Full details of pricing, allotments and expected returns are to be announced in the next week or two.
  • Exporters have predicted that growth of shipments abroad will slow to 5% next year, from 9% this year, with higher oil prices a major threat to prospects.
  • Headline inflation rose for a 15th straight month in September year-on-year, but slowed from August, mainly because of lower fresh food prices. Consumer confidence fell for the first time in four months in September, as people were more concerned about the impact of higher oil prices, relatively low farm prices, international trade tensions and the slow pace of economic growth.
  • Energy policymakers will raise the 30-bahtper-litre cap on diesel if oil prices exceed US$90 per barrel, the energy minister says. The Eastern Economic Corridor Policy Committee has approved four infrastructure projects worth a combined 432.85 billion baht. Bidding terms are expected to be announced later this month.
  • The Revenue Department has defended its selection of Counter Service Co, a payment service provider wholly owned by the 7-Eleven operator CP All Plc, to provide value-added tax (VAT) refunds for foreign tourists outside airports. Two rival bidders plan to file appeals.
  • The Electricity Generating Authority of Thailand (Egat) is seeking approval for a 35-billion-baht plan to develop two coalfired units at its Mae Moh power plant in Lampang to replace two units to be decommissioned in 2020.
  • Thai Storage Battery (BAT-3K) will spend 700 million baht for the entire business transfer of its wholly owned subsidiaries to pave the way for restructuring.
  • Thai Beverage Plc (ThaiBev) plans a management reshuffle to support growth in the beer business in Asean, after winning a bid for a 54% holding in Sabeco of Vietnam. CP Group plans to start construction of a 15-billion-baht healthcare centre next year and expects to begin commercial services in 2021.

COMING UP:

  • Australia will release the September business confidence index on Tuesday, with Germany releasing August trade figures the same day.
  • Britain will release August trade figures on Wednesday and the European Central Bank will hold a nonpolicy meeting.
  • On Thursday, the Bank of England will release its credit conditions and bank liabilities survey, with the US releasing September inflation data.
  • The Reserve Bank of Australia will release its financial stability review on Friday, China will announce September trade figures and the US will release the preliminary consumer sentiment index for October.

STOCKS TO WATCH:

DBS Vickers Securities Thailand recommends fundamental stocks such as AOT, BBL, BCP, CPALL, HMPRO and SEAFCO. High dividend yield picks are KKP, PSH, LALIN, SENA, LH, TMT, MODERN, BCP, MC, SNC, DIF, JASIF and CPNREIT.

  • Finansia Syrus Securities recommends stocks with positive growth prospects in October, among them BDMS, CPALL, CPN, MINT and PTTGC.

TECHNICAL VIEW:

DBS Vickers Securities Thailand sees support at 1,710 points and resistance at 1,745. UOB Kay Hian Securities Thailand sees support at 1,715 and resistance at 1,780.

Article source: https://www.bangkokpost.com/business/finance/1553010/emerging-markets-wobble-as-investors-flock-to-us-debt

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