China slump and Fed on investors’ minds

Recap: Asian shares were mixed yesterday as investors grew more concerned over the economic downturn after data showed a sharp second-quarter slowdown in China. However, some investors welcomed comments from two US Federal Reserve governors who said an overly aggressive interest-rate increase was probably not needed.

The SET index moved in a range of 1,517.51 and 1,560.01 points this week before closing yesterday at 1,533.37, down 1.57% from the previous week, in daily turnover averaging 55.09 billion baht for four operating days.

Retail investors were net buyers of 8.14 billion baht and brokerage firms bought 614.04 million baht. Institutional investors were net sellers of 7.62 billion baht and foreign investors sold 1.14 billion baht worth of shares.

Newsmakers: Traders are now considering the prospect of a historic one-percentage-point Federal Reserve interest-rate increase later this month, following the shock delivered by the June US inflation figure of 9.1%. Two Fed governors say they believe 75 basis points will be sufficient for now.

  • Covid lockdowns have had an even bigger impact than expected on the Chinese economy, with Beijing reporting that GDP fell 2.6% in the second quarter from the previous quarter. Growth was just 0.4% year-on-year, and first-half expansion was 2.5%, well below the government’s target of 5.5% for the year.
  • China reported significant recovery momentum in passenger air travel and mail and cargo volume in the first half of 2022. The Civil Aviation Authority said passenger trips rose 53% year-on-year in May and 82% in June.
  • Shares in embattled Chinese property developers sank on Friday as homebuyers’ threats to stop mortgage payments on unfinished apartments outweighed regulators’ assurance that local governments would get help to deliver property projects on time.
  • Alibaba shares fell 5.7% yesterday after The Wall Street Journal reported that the Chinese tech giant’s cloud division had been summoned by Shanghai authorities in connection with a theft of police data.
  • Bearish bets on nearly all Asian currencies firmed to multi-year highs, as fears of an impending recession from rapidly rising interest rates dampened sentiment, a Reuters poll showed on Thursday.
  • The Philippine central bank raised its key rates by 75 basis points in an unscheduled move on Thursday and kept the door open for further tightening at its regular meeting in August to contain broadening inflationary pressure and rescue a faltering peso.
  • Singapore’s central bank also tightened monetary policy in an off-cycle move to fight mounting price pressures.
  • The Bank of Canada on Wednesday took the inflation bull by the horns, lifting its key policy rate by 100 basis points to 2.5%.
  • Gold headed for its fifth straight weekly decline, with the price in London perilously close to $1,700 an ounce, as the relentless surge in the dollar weighed on demand.
  • Europe will face a “really tough winter” with even higher energy costs, which could lead to power rationing “in a worst case”, Shell CEO Ben van Beurden said on Thursday.
  • Twitter shares jumped on Wednesday after a hedge fund said it had taken a stake in the company based on its “strong case” against billionaire Elon Musk for trying to back out of his $44-billion buyout bid. Twitter has called his exit strategy “a model of hypocrisy”.
  • The US crypto lender Celsius Network has filed for bankruptcy, becoming the latest victim in the cryptocurrency sector to wilt under a dramatic plunge in prices.
  • The Bank of Thailand said on Thursday it had no need to hold an urgent interest rate meeting ahead of its next scheduled meeting on Aug 10, despite surprise tightening moves by other regional central banks.
  • Most industry leaders believe private consumption in the second half is expected to remain flat, limited by pressure from high energy prices and the prolonged pandemic.
  • The cabinet approved extending the reduction of excise tax on diesel by 5 baht per litre for another two months to mitigate the impact of high energy prices.
  • The national oil and gas conglomerate PTT Plc says it will allocate 3 billion baht to the fast-dwindling Oil Fuel Fund, following its months-long support of price subsidy programmes.
  • Prices of palm oil for cooking are heading down as manufacturers, department stores and modern trade outlets have agreed to cut the price by 5-6 baht per litre to 62 baht per bottle, in line with lower production costs and improving domestic stocks.
  • Small banks have begun to launch new special fixed-deposit campaigns, offering higher interest rates in anticipation of higher central bank interest rates in the second half.
  • More than 500,000 additional foreign workers are needed to support agricultural product processing and food industries for export, construction, tourism and services, according to the Thai Chamber of Commerce.
  • Foreign tourist arrivals could reach 8 million this year, the Bank of Thailand says, if the current pace of 30,000 arrivals a day keeps up. That would be well above the central bank’s earlier forecast of 6 million.
  • Airlines are struggling to control airfares amid high operating costs, especially for fuel, and are asking the government to help ease their financial burden.
  • The planned 300-baht tourism fee is expected to apply to all foreigners without exception, serving as insurance coverage of up to 500,000 baht per person in case of accidents.
  • Phuket is speeding up help to more than 900 small hotel operators affected by closure due to their illegal construction on public land.
  • Transport Minister Saksayam Chidchob has set a deadline for the State Railway of Thailand and others involved in the long-delayed Thai-Chinese high-speed rail project to clear all hurdles setting back construction this month.
  • The Eastern Economic Corridor Policy Committee has approved a 1.34-trillion baht plan to develop a smart city in Bang Lamung district of Chon Buri over the next 10 years. The 15,000-rai site in tambon Huai Yai will be designed to accommodate 350,000 people by 2032 and create 200,000 direct jobs.
  • Thailand’s Charoen Pokphand Group and Reliance Industries of India are among the suitors for the German retailer Metro’s wholesale operations in India, industry sources say.
  • Central Group, Thailand’s largest retail conglomerate, plans to invest 30 billion baht in Vietnam between 2022 and 2026 to boost its sales.

Coming up: New Zealand will release second-quarter inflation data on Monday. On Tuesday, Britain will release May earnings and unemployment data, the euro zone will release June inflation and the US will release June building permits.

  • Britain and Canada will release June inflation data on Wednesday and the US will release June existing home sales. The European Central Bank will announce an interest rate decision on Thursday.
  • Britain and Canada will release updated retail sales data on Friday and Germany will release July manufacturing PMI.

Stocks to watch: Capital Nomura Securities recommends stocks that will benefit from baht depreciation, including GFPT, CPF, SAPPE, ASIAN, MEGA, KCE, BDMS and BH. Beneficiaries of oil price declines include SCGP, GPSC, BGRIM, CBG and SCC. For high-growth stocks, the brokerage recommends JMT, JMART, KCE, IIG, TIDLOR, BE8 and BBIK.

  • Yuanta Securities recommends stocks of companies expected to report good second-quarter earnings with low volatility, strong growth momentum and laggard prices including BDMS, BANPU, KBANK, CRC, GFPT, M, III and RATCH.

Technical view: Capital Nomura Securities sees support at 1,509 points and resistance at 1,556. Maybank Securities sees support at 1,520 and resistance at 1,570.

Source: bangkok post