Asian shares slump as Mideast risk rises

RECAP: Asian stocks plunged yesterday as broad risk aversion swept through markets on escalating tensions between Iran and Israel and worries about higher-for-longer US rates.

The SET index moved in a range of 1,330.24 and 1,380.12 points this week, before closing yesterday at 1,332.08, down 4.8% from the previous week, with daily turnover averaging 57.86 billion baht.

Retail investors were net buyers of 9.24 billion baht. Foreign investors were net sellers of 6.74 billion baht, followed by brokerage firms at 1.57 billion and institutional investors at 932.53 million baht.

NEWSMAKERS: Persistent US inflation coupled with rising risk abroad mean the Federal Reserve might not cut interest rates at all this year, Minneapolis Fed chief Neel Kashkari told Fox News this week. His Atlanta counterpart Raphael Bostic said he didn't think any easing would be appropriate until the end of 2024.

• The CME FedWatch Tool now indicates an 84.8% probability that the US central bank will keep rates unchanged in June and a 46.2% chance of a 25-basis-point rate cut in September.
• Oil prices eased back after Iranian media appeared to downplay Israeli strikes following Tehran's earlier bombardment of Israel. Brent crude briefly topped $90 a barrel on concerns that a wider regional conflict could endanger crude supplies.
• Cryptocurrencies fell heavily and bitcoin broke below $60,000 in a rush out of risky assets following reports of the Israeli missile strike on Iran. Bitcoin slid more than 5.5% to $59,961 in Asian trade.
• Gold prices jumped past $2,400 an ounce as investors sought safe-haven assets amid worries about the Middle East. Spot gold later eased to $2,388.49 on profit-taking. Thai prices changed several times yesterday, with one baht-weight (15.2 grammes) quoted at 41,650 baht on Friday afternoon.
• The US announced new sanctions on Iran, targeting its drone production after its attack on Israel, while avoiding sanctions on Iran's oil industry for now.
• Europe's economy is nearing the end of a malaise that has resulted in more than a year of near-stagnation, says European Central Bank president Christine Lagarde. The ECB is almost certain to cut rates at its June meeting, offering support for fragile growth.
• The International Monetary Fund (IMF) projects Russia's economy will grow by 3.2% this year -- significantly higher than those of the US, UK, France and Germany -- supported by still-strong and stable oil exports and high government spending.
• Morgan Stanley plans to lay off around 50 investment banking staff, 13% of its 400 positions in the Asia-Pacific region this week, at least 80% of them in Hong Kong and China.
• Google on Wednesday fired 28 workers after dozens of employees participated in sit-ins at company offices to protest against its cloud computing contract with the Israeli government.
• Apple CEO Tim Cook said the company might look at building a manufacturing plant in Indonesia after meeting with Indonesian President Joko Widodo on Wednesday in Jakarta. Earlier, he said the company aimed to increase investments in Vietnam.
• Apple said it removed Meta Platforms' WhatsApp and Threads from its China apps store after an order from China's internet regulator, which said the services pose risks to national security.
• Takashimaya, the Japanese upscale department store, plans to open a new shopping centre in Hanoi as soon as 2026, its first location abroad in eight years.
• The US said it would not renew exemptions to Venezuela's oil sanctions, signalling a return to stricter measures as the government has not followed through on promised electoral reforms.
• Taiwan Semiconductor Manufacturing Co (TSMC) cut its expectations for 2024 market growth, excluding memory chips, to about 10% while reporting better-than-expected first-quarter revenue and profit.
• The US aircraft manufacturer Boeing is planning to build and sell flying cars in Asia by 2030, Nikkei reported on Thursday, citing chief technology officer Todd Citron.
• Oracle plans to invest more than $8 billion in Japan over the next decade to meet growing cloud computing and AI infrastructure demand.
• Microsoft has announced a $1.5-billion investment in G42, an artificial intelligence giant in the United Arab Emirates, in a deal reportedly orchestrated by the US government to box out China.
• China reported industrial production rose 4.5% year-on-year in March while retail sales grew 3.1%, below expectations. New home prices fell 2.2%r, the steepest drop in over 8 years.
• The EV maker Tesla plans to lay off over 10% of its global workforce to cut costs after first-quarter sales missed targets.
• Toshiba is considering cutting several thousand jobs in Japan as it seeks to reduce costs and improve its profit structure, according to informed sources.
• Toyota Motor Corp announced a recall of approximately 55,000 of its 2023 and 2024 Prius and Prius HEV hybrid electric vehicles in the US. Another 156,000 vehicles are being recalled in Japan, Canada, Europe and Asia.
• Monthly visitors to Japan hit a record high in March and crossed 3 million for the first time ever, as tourists flocked to see its famous cherry blossoms and take advantage of the yen's slide to a three-decade low.
• The Thai banking sector is poised for higher non-performing loans (NPLs) in the first quarter, stemming from retail and small and medium-sized enterprises (SMEs), according to brokerages.
• SCB X Plc reported a first-quarter consolidated net profit of 11.3 billion baht, up 2.6% year-on-year. Loans grew by 2.1%, primarily from housing and corporate lending by Siam Commercial Bank, as well as digital and auto title loans by subsidiaries.
• The National Economic and Social Development Council (NESDC) expects the Israel-Iran conflict to have a limited impact on Thailand's economy, with any effects arising from volatility in financial markets and higher commodity prices.
• Thailand has developed a roadmap to become a member of the Organisation for Economic Co-operation and Development (OECD), a group of developed countries, aiming to elevate standards and broaden trade and investment opportunities.
• The Thai National Shippers' Council expects sluggish export growth in the second half of 2024 due to external risks like the Middle East conflict affecting third-quarter trade, but still projects 1-2% growth in 2024.
• Indorama Ventures (IVL), one of the world's largest petrochemical producers, plans to invest $1.89 billion over three years. It said a gradual recovery of the global petrochemical industry and asset optimisation should enable the company to return to its previous earnings peak by 2026.
• The SET plans to revise liquidity criteria for securities to enter the SET50 and SET100 indices, subject to public hearings being held until April 26.
• The Oil Fuel Fund Office said on Thursday that it would continue to subsidise retail diesel prices if the government allowed the diesel excise tax cut of one baht a litre to expire yesterday as scheduled.
• Global sustainability equity funds generated solid returns in the first quarter this year amid capital market volatility, with the abrdn Japanese Sustainable Equity generating the highest rate of return at 17.2%, according to Morningstar Research (Thailand).
• Air passenger numbers in Thailand should recover to pre-Covid levels by next year, though economic uncertainties and the slow rebound of some supply chains still hamper the industry, says Yongyut Lujintanon, area manager for Thailand, Laos, Cambodia, and Myanmar with the the International Air Transport Association.
• The labour union of the Bank for Agriculture and Agricultural Cooperatives (BAAC) is seeking legal opinions about whether the government can borrow from the state-owned bank to support its costly digital wallet handout.
• Major creditors, including Bangkok Bank and Kasikornbank, have agreed to provide fresh liquidity to cash-strapped Italian-Thai Development Plc, to support the contractor's business operations without requiring a rehabilitation plan.
• Thailand's Namwiwat Medical Corporation has signed an agreement with Zhubei-based Somnics Inc, which specialises in developing technologies for treating obstructive sleep apnea, a sleep-related breathing disorder.
• COMING UP: On Monday, Eurogroup finance ministers will meet, Japan will release a purchasing managers index (PMI) update and Canada will release its raw materials price index. Due Tuesday are US manufacturing PMI and new home sales, German manufacturing PMI, French services PMI and UK composite PMI.
• On Wednesday, the US will update durable goods orders and crude oil inventories, followed by preliminary first-quarter GDP on Thursday. Also on Thursday, the Bank of Japan holds a policy meeting.
• On Friday, the US will reports core personal consumption expenditure and Russia will release GDP and retail sales figures.
• Domestically, Asia Plus Securities on Tuesday will present its second-quarter investment outlook. The SEC has a press briefing on Wednesday.

STOCKS TO WATCH: InnovestX Securities recommends selective buys based on four themes amid ongoing risk from Middle East conflict. For investors with high risk tolerance, PTTEP is recommended as it benefits directly from higher oil prices. Refiners BCP and TOP are also trading plays.

• Escalation into a full-scale war could push oil prices above $100 a barrel if supply from Iran is affected. The worst case is a closure of the Strait of Hormuz, which accounts for 17% of world oil supply. This will lower marketing margins for oil retailers while aviation companies will face higher costs.
• Risk-averse investors should look for defensive stocks with strong fundamentals. They include healthcare (BCH and BDMS), land transport (BEM), commerce (CPALL and CPAXT) and telecoms (ADVANC).
• The third theme is stocks benefiting from the digital wallet policy, such as CPALL, CPAXT, BJC, HTC and SNNP. The fourth group comprises tourism-related plays including AOT, ERW, MINT and CPALL.
• Thanachart Securities recommends stocks less affected by geopolitical tensions. The hospital operator BDMS (target price 38 baht) is expected to report Q1 net profit of 3.9 billion baht, up 2.8% year-on-year. CPALL (target price 70 baht) is expected to see strong profits from both 7-Eleven and wholesale business, as well as benefits from the digital wallet and the recovery of tourism-based consumption.

TECHNICAL VIEW: DBS Vickers Securities (Thailand) sees support at 1,300 points and resistance at 1,370. InnovestX Securities sees support at 1,330 and resistance at 1,380.