Thai shares fall amid US inflation worries

Thai shares fall amid US inflation worries

The Thai stock market dropped yesterday, following global indices, after higher than expected US inflation stoked concerns over early interest rate hikes.

On Thursday the US inflation rate was revealed for January, reaching its highest level in 40 years as consumer prices jumped 7.5% compared with the same period last year. This exceeded analysts' forecast of 7.2% and put additional pressure on the Federal Reserve to move more aggressively with its monetary policies.

Analysts expect the Fed to raise the interest rate to 0.5% at its next meeting in March, and to 1% by July.

Bets on early interest rate hikes sent the benchmark 10-year Treasury yield above a key level.

On Thursday the tech-heavy Nasdaq Composite slid 2.1% to 14,185.64, while the S&P 500 shed 1.8% to 4,504.08.

The Dow Jones Industrial Average lost 526.47 points, or 1.47%, to close at 35,241.59. Stocks were volatile throughout Thursday.

The SET Index immediately plunged by 0.49% when it opened yesterday, while other Asian markets moved in the same direction. The SET Index closed at 1,699.20 yesterday, down 0.22%, in trade worth 95.4 billion baht. The most active stocks were KBANK, BBL and SCB. Foreign investors continued to record net buying of 5.83 billion baht.

If the Fed raises the interest rate to 0.5% in March, it will put pressure on Asian and Thai stock markets and cause regional capital inflows to slow in the short term, according to Krungsri Securities Research.

Krungsri Securities said stocks expected to benefit from the interest rate hike are banks and life insurance companies with a large portion of fixed-income assets and deposits in their portfolios.

The brokerage predicts investors will speculate on shares of listed companies expected to report good performances for the fourth quarter of 2021, especially those that benefitted from the government's easing of Covid-19 containment measures. That speculation is expected to help the SET Index continue its recent upward trend.

Krungsri Securities recommends selective buying of banking and insurance stocks, including Bangkok Bank, Kasikornbank (KBANK), Krungthai Bank, Siam Commercial Bank and Bangkok Life Assurance.

It also recommends buying shipping stocks expected to recover in tandem with growing global demand, including Precious Shipping and Thoresen Thai Agencies.

For the tourism sector and related businesses that should benefit from the government's easing of Covid-19 containment measures, the brokerage selected Airports of Thailand, Minor International, Central Plaza Hotel and Asia Aviation.

Krungsri Securities said the key factors to monitor next week include the US and Chinese producer price indices, the US consumer price index, and ongoing reporting of fourth-quarter operating results from both foreign and Thai listed companies.

Asia Plus Securities said the SET Index dipped yesterday because of negative sentiment triggered by spiralling inflation. The brokerage recommends investing in KBANK and other stocks with low volatility, such as Advanced Info Service and Siam Makro.

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