KBank Daily Update 3 November 2017

Disclaimer: For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein

was obtained from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein. Further information on the securities referred to herein may be obtained upon request.

Source: Reuters (ex counter rates); For latest counter rates:www.kasikornbank.co/EN/RatesAndFees/ForeignExchange/Pages/ForeignExchange.aspx

Market highlight: Donald Trump has announced Mr Jerome Powell’s name as the next Fed chair. Reaction in the market was muted as investors are of the view that Powell’s nomination will lead to a continuation of the Fed’s current monetary policy stance.

FX market mover: GBP/USD dropped by 1.40% to 1.3059. The pound was one of the biggest movers yesterday. The Bank of England increased rates in line with the market’s expectations. However, the pound took a hit as the central bank signaled that it will raise rate very gradually, given risks to economic outlook remains.

USD/THB dropped by 0.15% to 33.09. The baht weakened in line with other regional currencies.

Factors to watch today: CH Caixin PMI and US non-farm payrolls

US Market

Dow Jones

S&P 500Dollar Index

US 10 yr T-note (%)

US 2yr T-note (%)

NYMEX crude ($/b)

TGB Yield Curve 1m 3m 6m 1yr 2yr 3yr 5yr 7yr 10yr 12yr 14yr 18yr

2-Nov 1.10 1.16 1.34 1.40 1.45 1.56 1.84 2.11 2.46 2.57 2.73 2.81

Change (bps) -0.62 -0.57 -0.17 -0.19 0.00 -0.24 -1.41 -1.33 -0.52 -1.90 -0.87 -0.43

3-Nov 2-Nov BIBOR 1w 1m 2m 3m 6m 1yr

1.50 1.50 2-Nov 1.50982 1.52465 1.54064 1.56636 1.69932 1.96343

Repurchase Rates 1-day 7-day 14-day 1m

2-Nov 1.50 1.50 1.50 1.50 2-Nov

THBFIX (pm) 1m 3m 6m 1yr LIBOR

2-Nov 1.17850 1.19441 1.34938 1.52002 2-Nov

3m 6m

1.58907 1.39139

change

1.61275.61

Spot Gold ($ /oz)

54.54

2-Nov

23,516.26

2,579.8594.69

2.35

Change

81.25

0.49-0.0014

-2.70

-0.80

0.24

1.61

Thai Stock Market

SET Index

Market Turnover (Bt mn)Foreign Net Position (Bt mn)

Thai Bond Market

Total Return Index

Total Market Turnover (Bt mn)

Interbank Rates

Overnight (%)

2-Nov

1,701.93

1m

1.24212

Change

-12.62

-3,303.18-533.30

Change

1,116,542.74

46,459.72-1,584.50

2-Nov

274.67 0.19

-199,340.02

SWAP (THB/THB, Rates) 1yr 2yr 3yr

3-Nov Bid/Ask 1.36/1.39 1.48/1.51 1.62/1.65

KBank counter rate

(against THB)

USD

EUR

GBP

JPY

KBank Technical Analysis

USD/THB (Onshore)

USD/JPY

EUR/USD

EUR/THB

JPY/THB

3-Nov

33.08

113.92

1.1660

38.57

0.2904

38.90

0.29

Support

33.00

113.50

1.16

38.30

0.29

Sideway

Sideway

43.06

0.2877 0.2886

43.21 44.10

0.2965

Sight Bill

32.97

38.07 38.16

33.07

T/T

Buying Selling

T/T

38.59

0.2871

2-Nov

33.12

114.08

1.1656

Sideway

Sideway

Sideway

TrendResistance

33.20

114.30

1.17

4yr

1.76/1.79 1.89/1.92

5yr 7yr

2.07/2.12 2.28/2.33

10yr

Premium (1 month)

Export/Import

-1.44 / 1.7

0.68 / 9.73

0.61 / 6.87

0.9939 / 5.5904

33.37

38.91

Macro & Fixed Income Market

Daily performance

Bank of England raises rates Macro update:

The Bank of England decided to raise its policy rate in yesterday’s meeting. The Bank of England raised rates for the first time in almost a decade to combat high inflationary pressures. The monetary policy committee voted 7-2 to increase the benchmark rate to 0.50% from 0.25%. This move had been fully priced in by the market. However, the pound weakened after this meeting as the central bank signaled that it will hike rates “very” gradually, in order to combat inflation. Inflation is expected to peak at 3.2%YoY this October, and to average up to 3% this whole year. Furthermore, the central bank also dropped a line from its statement, that had earlier read that rates would need to rise more than the market’s expectations. All in all, this suggests that the central bank will only tighten monetary policy gradually, as risks to the economy remain. In fact, the bank is of the view that risks to economic outlook are still considerable given the UK’s decision to withdraw from the European Union.

Republicans unveil the US tax reform bill. Under this bill, the corporate tax rate is expected to drop to 20%, while the personal income tax is expected to be simplified. However, market reaction to this was quite muted, as investors are still uncertain if this reform will garner enough approval. Indeed, there could be some opposition to this plan, as said reforms will likely increase the US budget deficit.

Fixed income market:

Thai government bonds traded in a tight range. The yield on the 2-yr government was unchanged at 1.45%, while the yield on the 10-yr government bond was also unchanged at 2.46%. Trading activity in the market was quite light yesterday, with foreign investors as net sellers (THB 3.9 bn) in the Thai bond market.

US treasury yields dropped slightly, as investors wait to see the non-farm payroll numbers. The 10-yr UST yield dropped by 2bps to 2.35%, while the 2-yr yield was unchanged at 1.61%.

0

2

4

6

8

Jan-00 Feb-02 Mar-04 Apr-06 May-08 Jun-10 Jul-12 Aug-14 Sep-16

UK Policy Rate (%)

1.2

1.6

2.0

2.4

2.8

1700

1850

2000

2150

2300

2450

2600

2750

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

%

S&P Index 10yr Treasury yield, right

0.00

0.30

0.60

0.90

1.20

1.50

1.20

1.50

1.80

2.10

2.40

2.70

Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17

10yr Treasury yield, % 2yr Treasury yield, % (right axis)

1

2

3

4

Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17

%

policy rate 2y 5y 10y

0

25

50

75

100

125

150

Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17

2-10 spread 2-5 spread 5-10 spread

bps

.

Thai government bond yields

Bond Market Indicators

US government bond yields

Thai government bond yields spreads

10-yr UST vs. S&P 500

FX Market

Current trend: The market is waiting for clearer progress on the tax reform front, which is expected to support the dollar as the recent quantitative tightening program has not yet strengthened the dollar. On the Thai monetary policy front, the BOT is expected to stay on pat as domestic demand remains weak. As for the USD/THB, the high current account surplus will likely slowdown the rise in the USD/THB.

• EUR/USD increased by 0.34% to 1.1658. The euro strengthened against the dollar despite the unveiling of the Republican tax reform bill.

• USD/JPY dropped by 0.08% to 114.09. The yen weakened slightly mainly due to the weakening in the dollar.

• GBP/USD dropped by 1.40% to 1.3059. The pound was one of the biggest movers yesterday. The Bank of England increased rates in line with the market’s expectations. However, the pound took a hit as the central bank signaled that it will raise rate very gradually, given risks to economic outlook remains.

• Asian currencies mainly strengthened against the dollar. The dollar failed to receive a boost from the announcement of the name of the new Fed chair and the release of Republican tax reform bill. As for the new Fed chair, the market had been expecting Mr Powell to be nominated; thus, this was in line with expectations. Moving on, the tax reform bill failed to fuel a rally in the dollar as details in the plan were in line with market’s expectation. Furthermore, the tax reform plan will likely add to the US’s budget deficit; thus, it remains to be seen if this tax reform bill will be able to garner enough support. Lastly, the US initial jobless claims data was somewhat in line with the market’s expectations, and continued to suggest resilience in the US labor market. USD/CNY dropped by 0.07% to 6.605.

• USD/THB dropped by 0.15% to 33.09. The baht weakened in line with other regional currencies.

Currency Movement

Market Strategists:

Peerapan Suwannarat

Tel: 02 470 1031

peerapan.s@kasikornbank.com

Anchali Singh

Tel: 02 470 3235

anchali.s@kasikornbank.com

Morning Daily

Spot 2-Nov-17 1-Nov-17 % Change 4Q2017 1Q2018

USD/THB** 33.09 33.09 33.14 -0.15 33.50 33.50

USD/JPY 113.96 114.09 114.18 -0.08 113.00 114.00

EUR/USD 1.1659 1.1658 1.1619 0.34 1.18 1.18

GBP/USD 1.3055 1.3059 1.3244 -1.40 1.32 1.31

USD/CNY 6.609 6.605 6.609 -0.07 6.650 6.660

USD/SGD 1.3590 1.3591 1.3610 -0.14 1.3600 1.3600

USD/IDR 13,509 13,495 13,550 -0.41 13,500 13,486

USD/MYR 4.23 4.23 4.23 0.07 4.21 4.18

USD/PHP 51.45 51.36 51.54 -0.34 51.50 51.50

USD/KRW 1,112 1,112 1,112 0.04 1,144 1,140

USD/TWD 30.19 30.19 30.15 0.13 30.30 30.50

AUD/USD 0.769 0.77 0.768 0.48 0.78 0.78

USD/CHF 1.00 1.00 1.00 -0.38 0.98 0.98

JPY/THB 29.04 29.00 29.02 -0.07 29.65 29.39

EUR/THB 38.58 38.58 38.51 0.19 39.53 39.53

GBP/THB 43.20 43.21 43.89 -1.54 44.22 43.89

CNY/THB 5.01 5.01 5.01 -0.08 5.04 5.03

Source:Bloomberg and KBank**

Closing rates Consensus forecast

KBank THB NEER index

As of 9th October, 2017

100

102

104

106

108

110

112

114

96

98

100

102

104

106

108

110

112

114

116

May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18

KBank NEER,base = Jan 1995, left Latest data point, left BOT NEER, base = 2012, right

KBank Rich / Cheap Model

As of 9th October, 2017

13

8

4

-2

-6

-15

-13

-9

-3

0

-11

-8

8

4

-0

16

12

-4

9

0 0

7

-5

-1

3

-20

7 7 8

4

-12

-18

-25

-15

-5

5

15

LB17

OA

LB18

3A

LB18

3B

LB19

1A

LB19

3A

LB19

6A

LB19

8A

LB20

6A

LB21

3A

LB21

4A

LB21

DA

LB22

6A

LB22

NA

LB23

3A

LB23

6A

LB24

4A

LB24

DA

LB25

DA

LB26

7A

LB26

DA

LB27

DA

LB28

3A

LB29

6A

LB31

6A

LB32

6A

LB36

6A

LB38

3A

LB39

6A

LB40

6A

LB41

6A

LB44

6A

LB46

6A

bps (actual YTM vs model) 3 mth avg Now

Fixed Income Auctions for November 2017

7 Note: Auction schedule is based on information from PDMO and BOT; may be subject to changes.

KBank Rich-Cheap Model

Note: As of October 7th, 2016

-15

-10

-5

0

5

10

15

LB17

6A

LB18

3A

LB18

3B

LB19

3A

LB19

6A

LB19

8A

LB21

3A

LB21

DA

LB23

3A

LB23

6A

LB24

DA

LB25

DA

LB26

7A

LB27

DA

LB29

6A

LB32

6A

LB38

3A

LB39

6A

LB40

6A

LB41

6A

LB44

6A

3 mth avg Now

bps (actual YTM vs. model)