KBank Daily Update

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.

28 February 2019

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

Market highlight: Global markets were on the risk off mode from rising geopolitical risk, including the meeting between Trump-Kim, tension between India and Pakistan, as well as comment from top trade representative on the uncertainty over trade deal between US-China. Stock and FX markets closed mixed. Fed‟s Chair Powell said at his testimony on the second day said that Fed was close to agreeing the plan to end balance sheet runoff.

FX market mover: The dollar index jumped as market concern over the prolonged trade deal returned after Lighthizer reported to the US House.

USD/THB increased 0.25% to 31.39. The baht depreciated due to concern over domestic political situation.

Factors to watch: BOT monthly economic report and current account balance for January, US GDP for Q4, China PMI for February.

US Market

Dow Jones

S&P 500Dollar Index

Thai Bond Market US 10yr T-note (%)

Total Return Index US 2yr T-note (%)

Total Market Turnover (Bt mn)

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

27-Feb 1.57 1.66 1.74 1.78 1.75 1.83 2.20 2.35 2.52 2.74 2.88 3.00

Change (bps) -0.54 -0.52 -0.53 0.38 -3.04 -3.75 -0.31 0.32 0.33 1.38 1.68 1.98

Interbank Rates 28-Feb 27-Feb BIBOR 1w 1m 2m 3m 6m 1yr

Overnight (%) 1.75 1.75 27-Feb 1.76831 1.79951 1.82718 1.87189 1.96419 2.19804

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

27-Feb 1.55 1.64 1.64 1.66 28-Feb

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

27-Feb 1.76110 1.79738 1.77705 1.87958 27-Feb

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

28-Feb Bid/Ask 1.74/1.77 1.79/1.82 1.85/1.88

KBank counter rate

(against THB)

USD

EUR

GBP

JPY

KBank Technical Analysis

USD/THB (Onshore)

USD/JPY

EUR/USD

JPY/THB

EUR/THB

1m 3m

2.62613 2.68500

6m

4yr

1.905/1.935 1.96/1.99

5yr 7yr

2.075/2.125 2.23/2.28

10yr

2.48925

42.29

36.12

31.58

T/T

Selling Premium/Discount (1 month) as of 27-Feb

Export/Import

-3.7 / 1.7

-1.77 / 20.65

-6.11 / 24.5241.30

35.29

31.18

Buying

T/T

31.28

35.39

41.44

Sight Bill

Sideway

0.01 / 19.640.2791 0.2800 0.2880

111.30

31.60

Resistance Trend

Sideway

Sideway

28.10

35.500 36.10

28-Feb

31.44

110.89

1.14

28.37

35.77 35.73

28.31

1.14

110.98

31.37

28.70

1.1414

27-Feb Support

31.30

110.50

1.1329 Sideway Down

Sideway Up

Change

25,985.161,665.27 -72.82

27-Feb 27-Feb

2,792.3896.15

52,569.99-640.04

2.69

2.51

Spot Gold ($ /oz)

1319.65

%change

-0.01

-1.520.16%

5.7 bps

2.2 bps

Change

-0.04

126,218894,115

280.66

27-Feb

SET Index

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

1.71

-494.97-19.40

Change

Dear Valued Customers, We would like to invite you to participate in the The Asset„s survey of institutional investors regarding “The Asian Local Currency Bond Benchmark Review 2019” as per the following link: https://research.theasset.com/index.php/826332/lang-en?bbid=3184391 or click here As always, we thank you for your continued support of our research products and services. Yours Sincerely, Kobsidthi Silpachai, CFA Head – Capital Markets Research Kasikornbank

https://research.theasset.com/index.php/826332/lang-en?bbid=3184391

Macro & Fixed Income Market

Daily performance

Macro update:

US Trade Representative Robert Lighthizer commented that much work need to be done before reaching trade deal with China. Lighthizer spoke yesterday that the China‟s increased imports of US goods would not be enough for the deal to be reached. He wanted China to make deep reforms, especially on intellectual property rights and technology transfer.

US Fed Chair Jerome Powell said the end to balance sheet runoff is to be announced “fairly soon”. In the second day of testimony in front of the House representative financial service committee, Powell said the plan to end balance sheet runoff is to be announced “fairly soon”. He also said that, given higher demand for reserve and currency in circulation, the size of balance sheet will not go back to very small seen prior to financial crisis, rather he pointed out that the size after the crisis was at about 16-17% of GDP.

US US trade deficit widened sharply in December. The trade deficit registered USD 79.5 billion from USD 70.5 in the previous month. Exports contracted 2.8%, while imports increased 2.4%. The largest deficit saw in consumer goods balance (USD 38 billion) and trade of auto (USD 19.8 billion). US factory order increased less than expected in December. The order rose 0.1%MoM, falling short of market expectation of 0.6%MoM. Stronger order in capital goods supported the factory orders. Excluding Transportation, the order contracted 0.6%MoM.

UK PM May push for 3 key parliament votes on 12-14 March, including, PM May's amended deal, the rejection to the possibility of no deal, or short delay of Brexit (i.e. no later than June). If the vote on PM May's deal is rejected on 12 March, there will be a vote to keep no-deal brexit on 13 March. And if that is also rejected, then there will be a vote on short extension to article 50, on 14 March.

Fixed income market:

• Thai government bond yield curve steepened. The 2-yr yield fell 3 bps to 1.75% while the 10-yr yield steadied at 2.52%. The bond market on Wednesday recorded a net inflow of THB 0.33 billion.

• US Treasury yields increased, curve steepened. The 2-yr yield added 2 bps to 2.50% and the 10-yr yield rose 4 bps to 2.68%.

US Factory New Orders

1.0

1.5

2.0

2.5

3.0

3.5

Jan-16 Jun-16 Nov-16 Apr-17 Sep-17 Feb-18 Jul-18 Dec-18

%

policy rate 2y 5y 10y

0

20

40

60

80

100

120

140

Jan-16 Jun-16 Nov-16 Apr-17 Sep-17 Feb-18 Jul-18 Dec-18

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

bps

.

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18

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

0

20

40

60

80

100

120

140

160

Jan-16 Jun-16 Nov-16 Apr-17 Sep-17 Feb-18 Jul-18 Dec-18

bps

2-10 spread 5-30 spread

Bond Market Indicators

Thai government bond yields Thai government bond yields spreads

US government bond yields US treasury yields spreads

0

50

100

150

200

250

300

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18

bps

2-10 spread 5-30 spread

FX Market

Current trend: Concerns over global economic slowdown, trade conflict and risk surrounding Emerging Market Economies eased, at least in short term, as 25% tariff on China is to be halted beyond 1 March for trade talk and conclusion from trade talk between the US and China is becoming more likely. On the Fed rate hikes, market is still wondering how fast the Fed will lift the rate given less optimism upon the US economic outlook. Geopolitical risk may have impact on the foreign exchange market volatility throughout the year.

EUR/USD dropped by 0.17% to 1.1370. The euro depreciated due to a dollar strengthening. US Trade Representative Robert Lighthizer gave more caution for market on the trade hope as he said that “much work needs to be done” and a trade deal will include “significant structural changes”. Besides, the crux is to ensure China to comply with the rules especially IPR and technological transfer. That is it is still too early to tell if China will concede to US demands. This was contrast to Trump‟s positive message sent during early week. This drove the dollar index higher by 0.16%.

USD/JPY went higher by 0.37% to 111.00. The yen depreciated as the dollar sentiment was higher. Powell repeated his confidence on the US past economic performance with no rush to increase Fed Funds rate further and prepare to adjust balance sheet runoff.

GBP/USD rose by 0.43% to 1.3309. The pound advanced amid growing optimism that the UK probably avoid a no-deal Brexit.

USD/CNY fell by 0.19% to 6.687. The yuan appreciated as Lighthizer said China is probably manipulating its currency. This morning, the PBOC set the reference rate higher to 6.6901.

Most Asian currencies

were mixed. IDR, SGD, and KRW depreciated against the greenback while PHP, MYR,

and NTD moved in an opposite direction. Yesterday, INR depreciated 0.25% due to an

escalation of tensions between nuclear powers India and Pakistan.

USD/THB increased by 0.25% to 31.39. The baht depreciated due to a concern over domestic

political situation.

Currency Movement

Market Strategists:

Peerapan Suwannarat

Tel: 02 470 1031

Peerapan.s@kasikornbank.com

Warunthorn Puthong

Tel: 02 470 3235

Warunthorn.p@kasikornbank.com

San Attarangsan

Tel: 02 470 1583

San.a@kasikornbank.com

Morning Daily Consensus forecast

Spot 27-Feb-19 26-Feb-19 % Change End-2019

USD/THB** 31.43 31.39 31.31 0.25 33.00

USD/JPY** 110.93 111.00 110.59 0.37 113.00

EUR/USD** 1.1378 1.1370 1.1389 -0.17 1.17

GBP/USD 1.3318 1.3309 1.3252 0.43 1.37

USD/CNY 6.687 6.687 6.700 -0.19 6.70

USD/SGD 1.348 1.349 1.347 0.10 1.33

USD/IDR 14,030 14,030 13,992 0.27 14,000

USD/MYR 4.071 4.065 4.072 -0.16 4.09

USD/PHP 51.91 51.91 52.03 -0.23 53.50

USD/KRW 1,119 1,119 1,119 0.03 1,108

USD/NTD 30.77 30.77 30.78 -0.03 30.70

AUD/USD 0.715 0.714 0.719 -0.67 0.74

USD/CHF 1.001 1.002 1.000 0.19 0.98

JPY/THB 28.33 28.27 28.31 -0.12 29.20

EUR/THB 35.76 35.68 35.66 0.08 38.61

GBP/THB 41.85 41.77 41.49 0.68 45.21

CNY/THB 4.70 4.69 4.67 0.44 4.93

Source:Bloomberg and KBank**

Closing rates

KBank THB NEER index

Source: BOT and KBank calculation as of Feb 25, 2019

Non-Resident Inflows

Source: CEIC and KBank

FOREIGN ACTIVITY IN THAI FIXED INCOME MARKETS

Unit: THB mn 21/02/2019 22/02/2019 25/02/2019 26/02/2019 27/02/2019 change D/D change W/W

Trading Transaction: Evening (T-1): Buy (Thailand) 1,755.3 549.7 176.5 882.6 423.0

Trading Transaction: Evening (T-1): Sell (Thailand) 2,448.6 1,382.2 846.9 380.0 272.8

Trading Transaction: Evening (T-1): Net (Thailand) -693.3 -832.5 -670.4 502.6 150.2

Trading Transaction: Morning (T): Buy (Thailand) 137.3 437.3 106.7 14.5 184.0

Trading Transaction: Morning (T): Sell (Thailand) 225.3 645.3 0.0 168.6 815.9

Trading Transaction: Morning (T): Net (Thailand) -88.0 -208.0 106.7 -154.0 -632.0

Trading Transaction: Afternoon (T): Buy (Thailand) 4,835.3 3,645.4 18.8 246.1 840.2

Trading Transaction: Afternoon (T): Sell (Thailand) 7,861.9 1,916.1 626.5 709.6 26.4

Trading Transaction: Afternoon (T): Net (Thailand) -3,026.6 1,729.3 -607.7 -463.5 813.8

Total Net Trade: Short-Term (TTM 1Y) (Thailand) -1,321.2 -1,724.8 -1,106.0 -77.6 358.5

Total Net Trade: Total (Thailand) -3,807.9 688.8 -1,171.4 -114.9 332.1

Expired Bond (T) (Thailand) 495.0 0.0 0.0 0.0 0.0

Net Flow (Thailand) -4,302.9 688.8 -1,171.4 -114.9 332.1

Short-Term Holding (T) (Thailand) 109,263.5 112,093.8 112,039.3 112,868.5 112,842.5 -26.0 3,579.0

Long-Term Holding (T) (Thailand) 852,065.9 849,525.4 848,456.5 847,538.8 847,889.2 350.4 -4,176.7

Total Holding (Thailand) 961,329.5 961,619.2 960,495.9 960,407.3 960,731.7 324.4 -597.8

Expired Bond on Next Day (T+1) (Thailand) 0.0 0.0 0.0 0.0 805.0

Thai yield curve stats

Source: Bloomberg and KBank

1.57

1.

66

1.75

1.

77

1.79

1.88

2.0

8 2.2

0

2.27

2.34

2.41

2.44

2.52

2.66

2.72

2.80

2.85

2.88

2.91

2.94

2.97

3.00

3.06

3.14

3.21

3.24

3.25

3.25

3.25

3.24

1.00

1.20

1.40

1.60

1.80

2.00

2.20

2.40

2.60

2.80

3.00

3.20

3.40

3.60

3.80

- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

lower bound 2SD

upper bound 2SD

AVERAGE

LATEST

period between 22-Feb-18 to 22-Feb-19

yield, %

maturity, years

Rich / cheap model

Note: The red dot is the spread between current and estimated bond yield in each sector. The green line is an average bond yield during the last 3 months. The vertical line represented the yield

movement during the past 3 months. Investors who do not have a solid view on yield curve outlook may use this model for short-term investment by buying an undervalued bond, whose yield above

the average (red dot above green line), and selling an overvalued bond, whose yield below average (red dot below).Under an assumption of mean reversion, we expect the current yields will convert

their average value in the next 3 months.

Source: KBank

-3

-14

-3

0 -11 1

-3

-11

4

8

-2

-25

-20

-15

-10

-5

0

5

10

15

20

LB206A LB21DA LB226A LB22DA LB236A LB23DA LB25DA LB26DA LB28DA LB316A LB326A LB366A

1.77% 1.82% 1.98% 2.07% 2.09% 2.17% 2.32% 2.4% 2.45% 2.74% 2.84% 2.95%

Yield spread (Act. - est.) (bps)

Sector, yield as of 22 Feb 19

3M Average Now

Fixed Income Auctions for FEBRUARY 2019

7

Source: PDMO and BOT; Note: may be subject to changes.

TFRS 9 in 2020

Thailand Federations of Accounting Professions (“FAP”) has announced that Thai

Financial Reporting Standard 9: Financial Instruments “TFRS9” and other related

standards effective date to be on 1 January 2020. Early adoption is permitted.

Among other requirements, TFRS 9 requires derivatives to be marked to market with

changes in fair value recognized in profit and loss. This will result in volatilities in profit

and loss and certain financial ratios of the Company.

Hedge accounting can be adopted to minimize profit and loss volatilities. However, the

process can be complicated and not all derivatives, such as short options, would qualify

for hedge accounting under TFRS 9.

In addition, TFRS 16 (leases) will tentatively be effective in 2020, which requires

operating leases to be recorded on balance sheet as liabilities.

Companies should consult their external auditors on TFRS 9 and TFRS 16 impacts.

For further information, refer to www.fap.or.th

Effective date of TFRS 9 has now been moved to 1 January 2020

Financial Instruments Accounting Roadmap in Thailand

Source: fap.or.th

การเคลือ่นไหวของอตัราแลกเปลีย่น

นกัวเิคราะห:์

ปารณีา พว่งศริ ิTel: 02 470 6749 pareena.p@kasikornbank.com

อญัชล ีซงิห ์Tel: 02 470 3235 anchali.s@kasikornbank.com

วรดา ตนัตสินุทร Tel: 02 470 1031 vorada.t@kasikornbank.com