Weekly Market Report (18th – 22nd February 2008)

Economic
US: The Federal Reserve (Fed) cut their GDP forecasts for this year from 1.8 – 2.3% previously estimated to 1.3 – 2%. Headline inflation was expected to increase by 2.1 – 2.4%, upped from 1.8 – 2.1% they projected three months earlier, while core inflation would run at 2 – 2.2%, increased from 1.7 – 1.9% in the last forecast.

Euro: The European Commission cut euro zone GDP outlook in this year to 1.8%, while the ECB kept positive view for the euro zone growth, and said that it would not sacrifice purchasing power for growth.

UK: January retail sales rose 5.6% YoY, four times higher than consensus, boosted by bargain prices on electrical products.

Japan: Reuters’ tankan survey showed that manufacturers’ sentiment hit 3-year low, dragged by higher production costs e.g. metal, oil and machines, while personal consumption was flat. January exports rose more than expected as strong exports to Asia and Europe counterbalanced for slow exports to the US. However, higher crude oil and natural gas prices pushed imports growth up and caused the highest trade deficit in two years.

China: Inflation rose by 7.1% in January, the highest level in 11 years, led by surging food prices due to the worst snow storm in 10 years in the second half of the month. The storm caused trouble in transportation and destroyed some agricultural products. Analysts expected higher inflation in February as the impact from the snow storm continued. Analyst expected the central bank would keep its tightening stances.

Thailand: The Thai economy continued to expand. Toyota Motor Thailand Co., Ltd. reported overall car sales growth by 17.6% in January, while the growth could be seen in every sector. Strong car sales implied that consumption and investment had been improved. Moreover, the Federation of Thai Industries (FTI) reported that industry sentiment climbed to 86.0 in January from 79.8 in December. For the MPC meeting on 27th February, the BoT said that it would take oil prices, Thai and global economic outlook into account.


Fixed Income Market
Government bond yield curve steepening for this week, yield of more than 5-year bonds increased 10-20 bps. Market yield continue to shift upward due to the postponement of 30% URR and also reacts sharply for a no-cut expectation in the next MPC meeting, (9/13 of economists). US indicators continue to weaken while US curve exhibit strong steepening bias due to significant rate cuts, Thai yield curve slightly follow US curve but mainly due to inflation fears, no-cut expectation, and potential larger-than-expected deficit bond supply.


Equity Market
Thai bourse ended a volatile week almost flat as selling pressure arose from weak data on US economy and spiking oil prices raises inflationary threat, hence dampening hope of further aggressive rate-cut. As a result, energy-related and cyclical names have outperformed relatively to consumer staples. Earnings released during the week were mostly inline, a few names topping expectation. Oil sets the record, jumped as high as USD101/bbl, 16% gains from this year’s low on Feb 7th on speculation that global demand, mainly from China and India, will continue to grow. However, gains were pared and prices dropped below the record level as US supplies have increased more than expected.
The information contained herein is AYF's opinion at the time of its publication and subject to change without prior notice.
credit :http://www.ayfund.com/en/marketViewDetail.asp?id=83