Asian markets retreat ahead of Powell speech

RECAP: A mini-rally on most Asian markets came to a halt yesterday ahead of a keenly awaited speech by US Federal Reserve chief Jerome Powell at around 9pm Thailand time, with traders increasingly worried about higher US interest rates.

However, the SET railed for four consecutive days on positive political news as the new Pheu Thai government took shape. The SET Index moved in a range of 1,514.70 and 1,563.62 points this week before closing yesterday at 1,560.20, up 2.7% from the previous week in daily turnover averaging 58.6 billion baht.

Institutions were net buyers of 5.99 billion baht, followed by foreign investors at 1.5 billion and brokers at 244.99 million. Retail investors were net sellers of 7.74 billion baht.

NEWSMAKERS: Goldman Sachs on Friday lowered its 12-month target for Asian equities excluding Japan, and now expects an earnings contraction for the region, on possible spillovers from weakness in China's growth and its embattled property sector.

• Chinese authorities ramped up efforts to bolster fragile financial markets, urging the country's pension fund and some large-scale banks and insurers to increase their stock investments.
• Fitch Ratings warned of a possible review of China's creditworthiness, currently rated A+, following an increase in the country's debt-to-GDP ratio.
• US Commerce Secretary Gina Raimondo this weekend begins a four-day visit to China to discuss resolving economic and trade problems.
• The World Trade Organization said global goods trade picked up between April and June amid strong auto demand but it voiced uncertainty about a sustained recovery. Its goods trade barometer rose to 99.1 in May from 95.6 the previous year.
• US business activity has approached the stagnation point, with growth at its weakest since February as demand in the services sector contracted. S&P Global said its flash Composite PMI fell to 50.4 in August from 52 in July, the biggest drop since November 2022.
• China has suspended imports of seafood products Japan after it began releasing treated water from the stricken Fukushima nuclear plant into the Pacific Ocean.
• The BRICS group -- Brazil, Russia, India, China and South Africa -- is adding six new members as it seeks to serve as a counterweight to Western-dominated economic and diplomatic groupings. Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE are scheduled to join the alliance on Jan 1.
• The chipmaker Nvidia reported record-high revenue and net profit in its fiscal second quarter, due to heavy demand for AI-related products.
• Euro zone inflation in July eased to 5.3% from 5.5% in June. But business activity remains weak, as high inflation and the European Central Bank's aggressive tightening are taking their toll on the economy.
• Cryptocurrency prices remain volatile due to continued concerns from regulators. Bitcoin reached an almost two-month low as risk aversion weighs on the crypto market, while global government bond yields have reached a 15-year high.
• A strike at a Chevron LNG plant in Australia could start as early as Sept 2 if a wage dispute is not resolved. This could cause wholesale gas prices to rise since Australia is one of the world's largest LNG exporters.
• The regional super-app operator Grab on Wednesday forecast a smaller operating loss on the back of cost savings from a recent workforce reduction. It now puts the adjusted loss between $30 million and $40 million, compared to an earlier forecast of $195 million to $235 million.
• The internet startup VNG has filed for a US initial public offering, making it the first Vietnamese tech company to seek a listing in New York. VNG aims to raise about $150 million in the IPO that could take place as soon as September.
• Parliamentarians elected Srettha Thavisin of the Pheu Thai Party as the country's 30th prime minister on Tuesday -- exactly 100 days after the May 14 general election. Businesses and markets cheered the end of a long period of uncertainty.
• Mr Srettha's election coincided with the return after 15 years of exile of Pheu Thai patriarch Thaksin Shinawatra. He was sent straight to jail but stayed there just 12 hours before being transferred to a hospital.
• One Asset Management has cut its forecast for the SET Index this year from 1,740 points to 1,570, citing a slowdown of the global and Thai economies, as well as prolonged domestic political uncertainty.
• The National Economic and Social Development Council (NESDC) reported Thai GDP growth of 1.8% year-on-year in the second quarter, slowing from 2.6% in the first quarter. Exports have shrunk for three consecutive quarters. It revised its full-year GDP forecast to a range of 2.5% and 3.0% from 2.7% to 3.7% earlier. It expects exports to contract by 1.8%.
• Thai exports shrank for a 10th consecutive month in July, and by far more than expected at 6.2% year-on-year. The Ministry of Commerce admitted its full-year growth target of 1-2% would be hard to meet, given the 5.5% contraction in the first seven months.
• The Bank of Thailand (BoT) expects to lower its economic growth forecast in September to reflect the effect of weak exports and the drag on purchasing power exerted by high household debt.
• Automakers and property developers say political uncertainty and high interest rates have been hurting Thai purchasing power, with a 20% loan rejection rate and a 40% mortgage rejection rate. As well, household debt is nearing 90% of GDP, the highest in over 10 years, causing consumers to delay purchases.
• Toshiba (Thailand) Co expects the white goods industry, except for air conditioners, to contract for a second consecutive year in 2023 because of weak purchasing power and high household debt.
• The BoT says commercial bank loans contracted by 0.4% in the second quarter due to corporate loan repayments. Non-performing vehicle loans increased to 2.05% from 1.89% in the first quarter. Personal loan NPLs were stable.
• The Ministry of Tourism and Sports reported 17.03 million foreign tourists entered Thailand between Jan 1 and Aug 20, generating revenue of 714 billion baht. The Tourism Authority of Thailand is keeping its full-year target for foreign tourists at 25 million to 30 million.
• The Pheu Thai Party is looking to refurbish airports all over the country and also build two new airports -- one in Chiang Mai and the other in Phuket -- as part of its aim to boost tourism.
• Vehicle production in July rose 4.7% year-on-year to 149,709, according to the Federation of Thai Industries, with exports rising 9.5% to 86,552. However, domestic vehicle sales slipped 1.2% to 63,157, reflecting tighter credit approval screening by banks.
• The Expressway Authority of Thailand (Exat) has delayed raising tolls for Chalong Rat and Bang Na-Chon Buri expressways for another six months to March 1, 2024, to help ease the cost of living and transport costs.
• The Rubber Authority of Thailand says that El Niño will affect major rubber-producing countries -- Thailand, Indonesia, Vietnam and Malaysia -- and will likely reduce production by 2% through 2525.
• The United States has confirmed it will impose penalty duties on some solar panels from Thailand, Malaysia, Vietnam and Cambodia, citing evidence that Chinese companies are establishing bases in these countries to avoid paying high tariffs imposed earlier by Washington.
• The number of Chinese exhibitors visiting Thailand has rebounded to only half of the level posted in 2019 because of economic woes and limited flights, says the Thai Exhibition Association.

COMING UP: The US on Monday will report the August manufacturing index from the Dallas Federal Reserve, followed by June home prices and August consumer confidence on Tuesday. Revised second-quarter US GDP and updated private-sector employment numbers are due on Wednesday, along with weekly oil inventories. Locally, the NESDC will release a report on Thai social development on Monday.

STOCKS TO WATCH: KGI Securities (Thailand) expects the new government to give priority to stimulating consumption. This should help stocks in the commerce, finance, media and industrial estate sectors. Its top picks include CPALL, CPN, CRC, SAWAD, TIDLOR, PLANB, AMATA and WHA.

• InnovestX Securities also has a positive view on the commerce and consumer goods sectors, with picks including CPAXT, CPALL, TNP, BJC and OSP.
• Asia Plus Securities is confident that the Pheu Thai government will be able to launch its digital wallet policy. Potential beneficiaries are COM7, TRUE, SIRI, SC, JMART, KBANK, SCB and GULF.

TECHNICAL VIEW: InnovestX Securities sees support at 1,500 points and resistance at 1,570. Finansia Syrus Securities sees support at 1,500 and resistance at 1,570.