Asian shares retreat on China weakness

RECAP: Stocks in Asia fell yesterday after data from China showed fresh economic weakness and traders reassessed the path forward for US interest rates.

The SET index moved in a range of 1,366.06 and 1,384.82 points this week, before closing yesterday at 1,382.68, up 0.8% from the previous week, with daily turnover averaging 43.83 billion baht.

Foreign investors were net buyers of 4.38 billion baht, followed by brokerage firms at 714.15 million. Retail investors were net sellers of 3.47 billion baht, followed by institutional investors at 1.62 billion.

NEWSMAKERS: The Dow Jones stock index briefly topped 40,000 points for the first time ever on Thursday, amid growing speculation that stubborn US inflation may ease and the Federal Reserve could begin cutting key interest rates.

• US consumer prices in April rose 0.3% from the month before, less than expected. Retail sales were little changed, suggesting slight cooling in the economy. Nevertheless, chairman Jerome Powell said the Fed needs to be patient and let high interest rates slow inflation further before deciding to make cuts.
• European Central Bank board member Isabel Schnabel said the central bank may cut interest rates in June, but should be cautious about further reductions given uncertainty over the outlook.
• The US Producer Price Index in April increased 0.5% month on month, higher than expected, raising concerns the Fed may keep rates higher for longer than anticipated.
• Japanese GDP shrank 2% year-on-year in the first quarter, squeezed by weaker consumption and external demand. The quarterly contraction was 0.5%, versus a 0.4% decline expected by economists.
• The International Energy Agency lowered its forecast for global oil demand growth in 2024 by 140,000 barrels per day to 1.1 million bpd due to weak demand from OECD countries.
• Chinese retail sales climbed 4.1% year-on-year in the first four months of 2024. Industrial output rose 6.7%, versus 5.5% anticipated and 4.5% in the previous period.
• Share prices of Chinese real estate developers rose as Chinese junk dollar bonds rallied to a three-year high on government plans to support the purchase of millions of unsold housing units worth 675 billion yuan.
• Home sales in China fell in April at a faster pace than the prior month and consumption unexpectedly slowed, providing a new warning sign for the economy.
• China blasted a US move to increase tariffs on a wide range of Chinese imports, vowing to take "resolute action". President Joe Biden is hiking tariffs on imports from China including semiconductors, solar cells and critical minerals, with rates ranging from 25% for batteries to 100% for electric vehicles.
• Sixty-four percent of Japanese companies consider the yen's weakness -- it's trading around 155 to the dollar -- a negative factor for their businesses, according to a recent survey.
• Apple supplier Foxconn reported a 72% rise in first-quarter profit, boosted by strong demand for AI servers and coming off a low base from the same period a year earlier, but the growth was lower than expected.
• China's Ministry of Finance is preparing to issue a special ultra-long-term government bond worth 1 trillion yuan, the fourth such issuance in 26 years, to bolster the economy, signalling increased fiscal spending.
• French President Emmanuel Macron said he was open to the takeover of some French banks by European rivals as Europe's banking sector needs more consolidation.
• Malaysian GDP grew 4.2% in the first quarter, up significantly from 2.9% in the final three months of 2023, driven by stronger private expenditure and positive turnaround in exports, Bank Negara said on Friday.
• Singapore Airlines on Wednesday reported record earnings for a second straight year. For the fiscal year ended March 31, profit was S$2.7 billion (US$2 billion), up from S$2.16 billion a year ago. It subsequently said staff would receive a bonus of almost eight months' salary.
• Finance Minister Pichai Chunhavajira said there was no talk of lowering interest rates at his meeting with Bank of Thailand Governor Sethaput Suthiwartnarueput on Thursday, as this is the responsibility of the central bank. He said the government was more concerned about easier access to credit, especially for retail borrowers and small businesses, than interest rates.
• Diesel prices rose yesterday by another 50 satang a litre, to 31.94 baht, after the Oil Fuel Fund Office approved another reduction in the subsidy. The fund has racked up debts exceeding 100 billion baht from subsiding fuel prices.
• The Real Estate Information Center (REIC) reported a sharp slowdown in residential demand in the first quarter, with transfers nationwide falling 13.8% and new housing loan growth declining 20.5% to the lowest in 25 quarters.
• The Bank of Thailand reported a drop in mortgage lending in the Thai banking system in the first quarter, with fewer new loan applications for both new and existing homes amid tighter lending standards, non-performing loan (NPL) concerns and an economic slowdown.
• The Thai Chamber of Commerce said its consumer confidence index in April fell for the second month on worries about the slow recovery of the economy, rising energy prices and concerns over the slowing global economy.
• The Federation of Thai Industries said its industrial confidence index dropped to 90.3 points in April, from 92.4 in March, as people remained cautious about spending while SME operators worried about a minimum wage hike and rising energy costs.
• The Thai Chamber of Commerce, provincial chapters and 94 trade associations have come out in opposition to the government's proposal to raise the daily minimum wage to 400 baht in October.
• The Ministry of Finance says the Thai economy in the second half will be driven by three sources of budget funds: the 2024 budget of 3.4 trillion baht, the 2025 budget of 3.75 trillion, and 500 billion baht from the digital wallet scheme.
• The cabinet has approved a special long-term visa for foreigners working in target industries in the Eastern Economic Corridor (EEC) for up to 10 years with a flat 17% personal income tax rate.
• The Tourism Authority of Thailand reported 569,172 foreign tourist arrivals in the week to May 12, down 11% from a week earlier. Year-to-date arrivals totalled 13.16 million, generating 631 billion baht in revenue.
• The Credit Bureau warns that Thai household debt at 91.3% of GDP poses dangers to the economic system. First-quarter household debt reached 13.64 billion baht, excluding cooperatives and student loans, with 8% being NPLs, mostly from auto loans.
• The Ministry of Finance will discuss the government's proposed entertainment complex project within two weeks, saying casinos should not exceed 5% of project areas and will require specific laws.
• Hotel occupancy rates in Bangkok in the first quarter of 2024 bounced back close to pre-pandemic levels, primarily fuelled by an influx of Mice (meetings, incentives, conferences and exhibitions) travellers.
• The Thai Hotels Association says members plan to raise room rates by 11-20% to cover higher costs, and hopes the government will introduce measures to boost domestic tourism during the low season.
• SET-listed Gunkul Engineering, a renewable energy developer that diversified into the cannabis and hemp business three years ago, is suspending further investment in cannabis based pending clarity from the government regarding its policy on the drug.

COMING UP: Japan will release its monthly tertiary industry activity index and Germany will update producer prices on Monday.

• On Tuesday, the Reserve Bank of New Zealand will hold an interest rate meeting and Japan will release trade figures. Wednesday brings a UK inflation update, US existing home sales and crude oil inventories. Minutes of the last Fed meeting will also be released.
• On Thursday, the US will release initial jobless claims, manufacturing and services PMI updates and new home sales. On Friday, Germany reports first-quarter GDP and the US releases monthly durable goods orders.
• Locally, the National Economic and Social Development Council will release official first-quarter GDP and its updated economic outlook.

STOCKS TO WATCH: InnovestX Securities recommends selective buys in three main themes. First is stocks for which earnings are expected to grow while prices have not increased. Top picks are BDMS, BEM, ERW, MINT, BCH and OSP. For those with high risk appetite looking to speculate on good Q2 results, consider BEM, KCE, HMPRO, THRE and TIDLOR. Finally, having oil-related stocks, particularly PTTEP, can help hedge against risks from tensions in the Middle East.

• Kingsford Securities recommends accumulating food and beverage stocks, particularly CPF, AAI, ITC, ICHI, CBG and OSP. Picks for stocks with Q2 recovery potential because of government spending include CK, STEC, SCCC and TASCO.

TECHNICAL VIEW: DBS Vickers Securities sees support at 1,350 points and resistance at 1,395. Pi Securities sees support at 1,365 and resistance at 1,395.