Asian shares advance as oil prices retreat

Asian shares advance as oil prices retreat

RECAP: Asian equities mostly rose yesterday as a drop in oil prices to pre-Ukraine war levels stirred hopes of a slowdown in inflation and bank interest-rate hikes. But while global markets have enjoyed a broadly positive week, recession worries and Chinese military drills around Taiwan have traders' nerves on edge.

The SET index moved in a range of 1,576.41 and 1,603.86 points this week before closing yesterday at 1,601.09, up 1.6% from the previous week, in daily turnover averaging 64.22 billion baht.

Institutional investors were net sellers of 13.55 billion baht while brokerage firms bought 1.05 billion baht. Foreign investors bought 8.84 billion baht and retail investors bought 3.65 billion baht worth of shares.

NEWSMAKERS: Oil prices headed for the biggest weekly decline since early April on increasing evidence that a global economic slowdown is weakening demand, with prices near a six-month low. Benchmark West Texas Intermediate, at $89 a barrel, was down 10% for the week.

  • Saudi Arabia has raised oil prices for buyers in Asia into record territory, with the global market remaining tight despite signs of weakening demand. The move came a day after the Opec+ alliance announced an output increase of only 100,000 barrels per day for September, one-sixth of its August figure.
  • Some Federal Reserve officials are pushing back against suggestions they will slow the pace of interest rate increases, after data showed the US was in a technical recession after a second straight quarter of GDP contraction in the second quarter.
  • One of the most reliable indicators of a recession has been an inverted yield curve, when yields on the 2-year US Treasury note (currently 2.83%) are higher than those on the 10-year note (2.50%). That has led Fed Watch Tool to forecast an end-2022 US interest rate of 3.5%, falling to 3.25% in early 2023.
  • Temperatures are rising in the Taiwan Strait, where China is carrying out live-fire exercises after US House Speaker Nancy Pelosi visited Taipei to cheer on the democratically elected government of the island that Beijing claims as its own. China has also suspended more imports of Taiwanese products.
  • The head of the Bank of England has denied that officials allowed inflation to get out of control, saying rate hikes a year ago would have damaged the recovery from the pandemic. The BoE lifted its benchmark rate 50 basis points this week, while warning that fuel-led inflation would peak at 13% in October and a recession could last into 2024.
  • The Singapore banking group DBS warned that inflation and geopolitical uncertainty might affect second-half performance, after the wealth business of the bank suffered in the latest quarter, though profit beat estimates on rising interest rates.
  • Samsung Electronics has scaled back production at its massive smartphone plant in Vietnam, employees say, as retailers and warehouses grapple with rising inventory amid a global fall in consumer spending.
  • Lufthansa forecast that its profit would keep rising in coming months amid a boom in demand, even as staffing shortages prompt airports to limit capacity. Europe's biggest airline group said it expected a "significant increase" in earnings in the third quarter compared to the second, after high ticket prices and bumper profit in the cargo division more than offset increases in fuel costs in the second quarter.
  • Malaysia's ban on chicken exports is expected to end on Aug 31, Agriculture and Food Industries Minister Ronald Kiandee said on Thursday. Malaysia in June halted exports until production and prices stabilise, after a global feed shortage exacerbated by the Russia-Ukraine war disrupted production.
  • Gold prices steadied at a one-month high yesterday, trading near $1,785 an ounce in London, ahead of US jobs data, as growing recession fears boosted safe-haven demand.
  • Hong Kong has tipped back into a technical recession, weighed down by mounting interest rates, weakened global trade and strict coronavirus controls. Second-quarter GDP contracted by 1.4%, after a 3.9% drop in the first quarter.
  • With recession fears mounting, many tech companies are rethinking staffing needs. They are freezing hiring, rescinding offers and even laying off workers. Robinhood Markets is one of the latest to make cuts, moving to eliminate 23% of its workforce. Oracle Corp also began paring staff this week.
  • Thailand's economy is expected to recover further, according to the IMF, which puts 2023 GDP growth at 4%, ahead of the global average of 2.9%. The Ministry of Commerce expects GDP growth of 4.2% and inflation at 2.5% next year, with exports continuing to improve. The country also welcomed 1.2 million foreign tourists in July, well above predictions, bringing the seven-month total to 3.3 million.
  • Headline inflation slowed marginally in July -- to 7.61% from 7.66% in June -- and is still near a 14-year high, reinforcing the view that the Bank of Thailand will start raising interest rates when its Monetary Policy Committee meets on Aug 10.
  • Thai businesses expect only a slight impact from simmering China-Taiwan tensions, with some seeing a somewhat positive impact in relation to exports, especially of food, and a possible relocation of production bases to other countries.
  • Nok Air has offered compensation to all 164 passengers of a flight that skidded off the runway after landing amid heavy rain at Chiang Rai airport last Saturday, saying it will put more stringent safety protocols in place.
  • Thai tourism earned 157 billion baht in the first seven months from 3.15 million international travellers. The Tourism and Sports Ministry is maintaining its target of 10 million tourists despite Prime Minister Prayut Chan-o-cha's suggestion that the tally would be lower.
  • The national oil and gas conglomerate PTT Plc has decided to sell its Indonesian coal mining business for US$471 million as the firm continues to move towards clean energy.

COMING UP: Locally, the SET will release July trading data and the Federation of Thai Industries will update the Industrial Confidence Index. The Bank of Thailand's Monetary Policy Committee will meet on Wednesday. On Aug 15, the National Economic and Social Development Council will release official second-quarter economic figures.

  • Internationally, China will report July trade figures and foreign reserves tomorrow. The US will release the July Small Business Confidence Index on Tuesday and China will announce July consumer and producer prices on Wednesday. Due on Thursday are US consumer prices and weekly oil market data.

STOCKS TO WATCH: Yuanta Securities forecasts the market dividend yield in the first half of this year to exceed 1.5%, and the outlook for third-quarter corporate earnings continues to improve. Its picks for stocks that will outperform the market in the second half of this year include TCAP, BANPU, LH, RATCH, SPALI, AH, AJ, KKP, INTUCH, BBL and ORI.

  • Capital Nomura Securities recommends three investment groups. First, firms that will benefit from the slowdown in oil prices such as SCGP, GPSC, BGRIM, BCPG, CBG, SCC, TOA, EPG and GULF. Second, high-growth/tech stocks based on domestic demand, such as JMT, SINGER, CHAYO, BE8, BBIK and IIG. The third group is consumer stocks with expected to benefit amid peak inflation, such as ADVANC and TIDLOR.

TECHNICAL VIEW: Capital Nomura Securities sees support at 1,581 points and resistance at 1,610. Maybank Securities sees support at 1,580 and resistance at 1,610.

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