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QE measures by ECB to lift Thai bourse

Mar 03. 2016
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By The Nation

GLOBLEX SECURITIES believes the Stock Exchange of Thailand will recover if the European Central Bank (ECB) persists with monetary stimulus or quantitative-easing (QE) measures when it meets next Thursday.

The euro zone’s inflation rate has contracted by 0.2 per cent.

The expectation that the US Federal Reserve will maintain its policy interest rate at 0.25-0.50 per cent when it meets on March 15 and 16 and the projected rise in crude-oil prices if Russia reaches an agreement with the Organisation of the Petroleum Exporting Countries should push the SET Index to 1,370-1,380 points, Globlex said.

Also enabling recovery of the SET is the news that the Airports Authority of Thailand (AOT) will seek approval from its board of directors on March 23 to proceed with the third-phase expansion of Don Mueang International Airport at a cost of more than Bt10 billion. The expansion will accommodate 40 million passengers a year.

The other factors pointing to an SET recovery are rising oil prices, high-dividend-paying stocks, lower-trending gold prices (US$1,190-$1,185 per ounce support level to $1,260-$1,265 resistance level) following positive economic outlook signs, and China’s central bank lowering its required reserve ratio rate by 0.5 percentage point to 17 per cent, effective from March 1, to boost China’s economy.

However, one factor that continued to put pressure on the SET was the 9.3-per-cent export contraction, which has prompted the Bank of Thailand to lower this year’s growth target for gross domestic product after weak Thai economic activities in January.

Moreover, China’s Purchasing Managers Index in February fell to 49 points, a seventh straight month of decline, and China’s PMI (service sector) fell to 51.2 from 52.4 in January, reflecting signs of China’s economic slowdown.

Investors are expected to shift some of their investments away from gold to stocks after the United States reported improved domestic economic data in January, especially in the construction sector, the highest since October 2007, as well as improved manufacturing data in February at 49.5, the highest since September 2015.

The US long-term inflation rate, which rose twofold in January to 1.3 per cent, close to the Federal Reserve’s 2-per-cent target, and the improved recent US economic figures prompted expectations that the Fed would raise its policy interest rate this year and the US dollar would appreciate, which should lower gold prices.

Based on bearish divergence signs, gold prices could again fall to $1,190-$1,185 per ounce |(support level) and $1,260-$1,265 an ounce (resistance level), Globlex said.

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