The sell-off continues as the inflation battle intensified

RECAP: Asian markets fell again yesterday and the dollar rallied amid a global sell-off fueled by mounting recession fears as central banks around the world hiked interest rates to fight decades of high inflation.

Despite the challenges, analysts believe Thailand’s stock market will benefit from an improving economic outlook as the Covid threat recedes and tourism continues to pick up. That should help support medium to long-term inflows and ease pressure on the baht.

The SET index traded in a tight range between 1,628.96 and 1,649.29 points this week before closing at 1,631.71 yesterday, up 0.08% on the previous week, on daily turnover averaging 64, 73 billion baht.

Foreign investors were net buyers of 1.73 billion baht and retail investors bought 2.81 billion baht. Brokers were net sellers of 1.46 billion baht and institutions sold 1.52 billion baht worth of shares.

NEWS MAKERS: The US Federal Reserve has lowered its growth forecast for the world’s largest economy from 1.7% in June to just 0.2% this year. It announced the revision after presenting its third consecutive 75 basis point rate hike and warning it was far from complete. The policy rate is now expected to hit 4.4% by year-end and 4.6% in 2023, the highest since 2007.

• The Bank of England raised interest rates to 2.25% from 1.75% on Thursday and said it would continue to respond to inflation “firmly as needed” even though the economy is likely already in a mild recession. She expects inflation to peak near 11%.
• The Asian Development Bank has revised down its growth forecast for the emerging Asian economies to 4.3% for 2022 from 5.2% in April. It also lowered its growth forecast for 2023, lowering it to 4.9% from 5.3%.
• Indonesia’s central bank hiked interest rates more-than-expected on Thursday in a bid to rein in inflation. The Philippines, Vietnam and Taiwan also hiked rates.
• The yen headed for its first weekly gain in more than a month after Japanese authorities intervened in markets to support the currency for the first time since 1998. The intervention came after the Bank of Japan maintained its negative interest rate policy, causing the yen to fall above 145 per dollar.
• The websites of Cathay Pacific Airways and its low-cost arm HK Express collapsed amid an onslaught of flight searches yesterday as the Hong Kong government announced that mandatory quarantine and other pandemic travel restrictions would be lifted from Monday.
• Japan on Thursday said it would finally lift tough Covid restrictions on foreign tourists. Effective October 11, number restrictions on daily arrivals will be lifted and tourists will be free to move around the country.
• Russia has enlisted more men for the war in Ukraine, sparking a rush to leave the country by men who don’t want to go. The partial mobilization of 300,000 reservists announced by President Vladimir Putin is likely to increase the geopolitical risk.
• The Thai government plans to borrow 2.23 trillion baht in the fiscal year beginning Oct. 1, about 3% below its target this year as the country scales back Covid-related spending. The borrowing includes 793.6 billion baht in new loans to cover the budget deficit and 1.44 trillion baht for refinancing.
• Domestic auto sales rose 61.7% year on year to 68,208 units in August, helped by an easing of Covid curbs and a low base last year, the Confederation of Thai Industries said. In the first eight months, auto sales rose 19.6% and are on track to hit the annual target of 850,000 units.
• Demands are growing for the Bank of Thailand to do more to stem the baht’s decline, which has fallen to 37.3 per dollar, its weakest in 16 years.
• Domestic economists are forecasting that the central bank’s Monetary Policy Committee (MPC) will hike interest rates by another 25 basis points to 1% at its meeting on Wednesday.
• The government will lift the state of emergency imposed since the pandemic began on October 1 and will disband the Center for Covid-19 Situation Administration. Also on October 1st, visitors to Thailand will no longer be required to show a Covid vaccination or test certificate.
• Finansia Syrus Securities (FSS) forecast that Thai Union Frozen Plc’s (TU) earnings recovery will continue in the third quarter as it is the peak season for seafood exports while tuna, aluminum and transport costs fall. Normalized earnings are expected to rise 17% year over year.
• The value of Thailand’s digital content industry is expected to reach 62.4 billion baht by 2024, up from 42 billion last year, driven by strong growth in the games sector and the recovery of the animation industry, says the Digital Economy Promotion Agency.
• Energy regulators plan to make gasohol E20 the main fuel at service stations in place of gasohol E10, also known as gasohol 91, which is being phased out.
• Central Retail Corp (CRC), the country’s leading mall operator, aims to open a total of 700 to 800 Tops Vita stores selling vitamins and supplements by 2027, with total sales of 1.5 billion baht.
• Thai steelmakers plan to hike domestic prices after rising operating costs, from commodity prices and utility bills to higher daily minimum wages. Electricity bills alone have increased by about 50%, they say.
• Chevron Offshore (Thailand) and US-based PTT Exploration and Production (PTTEP) are competing for new offshore oil exploration and production licenses in the Gulf of Thailand. The 24th auction round includes three offshore areas but does not include PTTEP’s Erawan and Bongkot gas blocks.
• The SET promotes a new type of depositary receipts (DRx) for foreign underlying securities. The first two, to be issued by Krung Thai Bank, will allow local investors to purchase shares in Apple Inc and Tesla Inc. They will be available from September 29th via the SET Streaming application.
• HappyFresh has suspended operations in Malaysia and Thailand after it struggled in those countries, leaving the struggling grocery delivery startup to focus on its main market in Indonesia.
• PTT Plc continues to grow its grocery business by injecting cash into Singapore-based startup Nutrition Technologies (NT), which can make protein from flies, to fund its new manufacturing facilities in Thailand and Southeast Asia.

ARRIVES: Investors this week will be assessing the results of Sunday’s Italian elections, which are expected to bring a far-right, Eurosceptic party to power. Economic data includes the German business sentiment index on Monday, as well as US durable goods orders and new home sales on Tuesday.

• Domestically, August trade data will be released on Monday. The Bank of Thailand will hold an interest rate meeting on September 28 and the Constitutional Court will decide on General Prayut Chan-o-cha’s term as prime minister on September 30.

STOCKS TO WATCH: Thanachart Securities is upbeat on Thailand’s tourism and consumption prospects. Recommended stocks include AOT, SPA, CENTEL, PTG, BA, BDMS, CPN, CRC, WHA, ADVANC, EA, NEX, BBL, and KTB.

• Thanachart also believes the Bank of Thailand will hike interest rates by at least 25 basis points in the coming week, which will benefit the banking sector. His picks are BBL and KTB.
• Capital Nomura Securities notes that Japan is now preparing to open the country to independent tourists without quarantine, which will support Thai stocks like AOT and AAV. Thailand is also ending most Covid controls and opening the country more to foreign tourists, benefiting hotel, retail and airline businesses. Recommended reopening stocks are ERW, CENTEL, VRANDA, AOT, AAV, BA, BJC, MAKRO, ONEE and BEC.

TECHNICAL VIEW: Thanachart Securities sees support at 1,620 points and resistance at 1,650. Phillip Securities (Thailand) sees support at 1,625 and resistance at 1,650.