Stocks recover after slipping on tough talk from Fed

RECAP: Most stock markets rose on Friday, reversing early losses and a sell-off on Wall Street, as traders contemplate further interest-rate increases by central banks struggling to tame inflation.

Thai shares moved in a range of 1,503.23 and 1,539.40 points before closing yesterday at 1,522.59, a decrease of 1.3% from a week earlier, in daily turnover averaging 52.06 billion baht.

Retail investors were the top net buyers at 6.63 billion baht, followed by brokers at 885.13 million. Foreign investors were net sellers at 5.3 billion baht, followed by institutions at 2.22 billion.

NEWSMAKERS: US Federal Reserve chairman Jerome Powell said on Wednesday that while some things are out of the central bank's control, he believes the Fed's aggressive interest-rate hikes will not send the economy into a downturn.

• The Fed this week held its interest rate steady at a 22-year-high of 5.25% to 5.50%, while signalling another hike for 2023 and saying policy would remain tighter in 2024 than previously expected. FedWatch Tool sees a 69% probability that the rate will not change in November. The Fed now expects to get inflation back to its 2% target in 2026.
• The Bank of Japan yesterday left its ultra-low rate of -0.1% unchanged, against expectations of a hike, saying it would continue with monetary easing to improve wage growth and buoy inflation levels. That put yet more pressure on the yen, which weakened past 148 against the dollar.
• Japanese consumer inflation was above expectations with core CPI rising 3.1% in August, the same as the July reading.
• The Bank of England held interest rates steady after 14 straight hikes as UK inflation rate fell unexpectedly to an 18-month low of 6.7%. But inflation fed by heating costs in the approaching winter remains a big concern.
• The US consumer confidence index for September fell to 67.7, from 69.5 in August. Home sales crept down further in August, industry data showed on Thursday, as mortgage rates remained high.
• The US homebuilder confidence index in September fell 5 points to 45, going below 50 for the first time in seven months, while new-home construction was at the lowest level since June 2020.
• Chinese industrial production in August grew by 4.5% year-on-year, while retail sales growth of 4.6% beat forecasts, creating some optimism about the economy.
• China says it plans to relax domestic capital control measures, starting in Shanghai and Beijing, to attract investment capital back to the country.
• The People's Bank of China (PBoC) on Wednesday left its benchmark lending rates unchanged as expected. The one-year loan prime rate (LPR) is at a record low of 3.45% and the five-year LPR, the peg for mortgages, is 4.2%.
• Apple has postponed delivery of the iPhone 15 Pro and iPhone 15 Pro Max in some countries, including the US, UK and India, by at most eight weeks from the former delivery date of Sept 22 due to high demand.
• The UK government has walked back an ambitious plan to ban combustion-engine vehicles in 2030, setting a new deadline of 2035, the same as in the EU.
• Toshiba on Thursday announced the success of a $14-billion tender offer from the private equity firm Japan Industrial Partners. The deal puts the 148-year-old company in domestic hands as it sets to be delisted as early as in December.
• Russia said it would temporarily suspend exports of oil products, including diesel and gasoline, to stabilise the domestic fuel market, effective immediately. It is considering collecting export tax on all oil products from Oct 1 until June 30 at $250 per tonne.
• The United Auto Workers (UAW) strike at General Motors, Ford and Stellantis factories threatens to expand after talks failed, raising concern about demand from the auto industry for chips and other materials.
• The Asian Development Bank has slightly downgraded its 2023 Asia-Pacific growth forecast to 4.7% but maintained its 4.8% projection for 2024, as it sees solid economic growth driven by healthy domestic demand, rebounding tourism and the reopening of China.
• Hong Kong's half-century reign as the world's freest economy has ended, according to the annual Economic Freedom of the World Index by the Fraser Institute. Singapore was assigned a score of 8.56, barely edging out Hong Kong at 8.55.
• Thailand ranked 64th out of 165 countries in the 2023 Economic Freedom of the World Index, an improvement from 72nd the year before and 79th in 2019 -- but well below the peak of 34 seen in 1990.
• The Thai government expects to borrow about 2.4 trillion baht in fiscal 2024 starting on Oct 1, 7.6% more than this year, to reflect an increase in funding needs, Bloomberg quotes sources as saying.
• More than 700 billion baht of the total borrowing would be new bond issues and other borrowing to finance a budget deficit expected to be 14% higher than called for in the 2024 budget approved by the previous administration.
• The Public Debt Management Office says government bond issuance in fiscal 2024 will be at an appropriate level. The limit for fiscal 2024 was increased from fiscal 2023 by around 160 billion baht to offset the budget deficit and support growth of the domestic bond market.
• The baht tumbled to a 10-month low at 36.26 to the dollar on Wednesday, before recovering slightly at week's end, but economists are warning the currency will weaken further amid volatility in money and capital markets worldwide after hawkish Fed comments about interest rates.
• The Asian Development Bank has revised up Thailand's GDP growth forecast from 3.3% to 3.5% for this year, with the 2024 prediction of 3.7% unchanged.
• In New York for UN General Assembly meetings, the prime minister has invited Microsoft and Google to invest in data centres, and also held talks with BlackRock, the world's biggest investment fund, and Tesla chief Elon Musk. Mr Srettha also told the UN that Thailand's target investment in green business has been raised to $45 billion from $12.5 billion.
• Airports of Thailand (AoT) has set a budget of 140 billion baht for two airport construction projects, including the building of the formerly stalled Andaman International Airport in Phangnga.
• Automobile output fell 12.7% year-on-year in August as financial institutions become stricter about approving loans, the Federation of Tha Industries said. The 2023 manufacturing target may be adjusted down from 1.9 million units.
• The Real Estate Information Center (REIC) reported a 32% decline in sales in Bangkok in the second quarter of 32%. Developers are asking for three stimulus programmes in 2024 including promotions for first-home owners, relaxation of loan-to-value ratio (LTV) rules and allowing foreigners to own a Thai residence.
• The Ministry of Finance plans a year-long pause on loans for SMEs with debt overdue for more than 90 days due to the effects of the pandemic. There are around 3 million who qualify with total debt of 300 billion baht.
• The Oil Fuel Fund Office (OFFO) has extended the freeze on LPG prices at 423 baht per 15-kilogramme tank for another three months, to the end of this year, to help lower energy costs.
• The government is being urged to review a new tax regulation that would require those with income from abroad to include it in the calculation of personal income tax. Most people believe the tax would affect only the wealthy but it would also affect many small retail investors who have invested overseas, says Jitta Wealth Asset Management.

COMING UP: On Monday, the US will report August economic activity and September manufacturing production. Tuesday brings US home sales prices for July, August new home sales, and updated consumer confidence. On Wednesday, China reports August industrial profits and the US releases weekly oil stock figures.

• Locally, the Ministry of Commerce on Monday will release August international trade and border trade figures. The Bank of Thailand Monetary Policy Committee will meet on Wednesday and is expected to leave interest rates unchanged.

STOCKS TO WATCH: Kasikorn Securities said "higher for longer" interest rates raises the risk of increased interest costs, which could affect profits for some companies in 2024. They include MICRO, TRUE, ANAN, BTS, ASK, CPF, BGRIM, BAM, BAFS, THANI, PTTGC, FPT, AEONTS, BCPG, BJC, MTC, SHR, CK and GPSC.

• Daol Securities sees beneficiaries from a depreciating baht in the agricultural and food, electronics and travel sectors.
• For firms with income from abroad, every 1-baht depreciation can increase profits by varying rates. Examples include ITC (+10%), AAI (+10%), TU (+7%), KCE (+6%), HANA (+5%), SUN (+3%) and PLUS (+2%).
• Travel-related firms remain attractive. Top picks are ERW (revenue proportion in Thailand 88%), CENTEL (revenue proportion in Thailand 80%) and AOT. Other industries positively affected by the weak baht because most of their income comes from exports include MEGA, EPG, TOG, and BANPU.
• Negatively affected are some airline-related stocks since some 60% of their cost structure is in dollars, and a weaker baht will increase costs. AAV has approximately $1 billion in US dollar debts, resulting in unrealised FX losses of approximately 1 billion baht from every 1 baht depreciation.
• The energy sector will have unrealised forex losses for stocks of PTTGC and TOP, while the impact on PTTEP and SPRC is likely to be limited because the dollar is used as a functional currency and IVL has a natural hedge.

TECHNICAL VIEW: InnovestX Securities sees support at 1,490 points and resistance at 1,540. Kasikorn Securities sees support at 1,500 and resistance at 1,570.