Asian shares decline as US rate-cut hopes dim

RECAP: Asian stocks tracked Wall Street lower in response to more economic data that signalled the US Federal Reserve might keep interest rates on hold for most of this year. Regional currencies also took a hit as dollar strength persisted.

The SET index moved in a range of 1,359.22 and 1,389.28 points this week, before closing on Friday at 1,364.48, down 1.3% from the previous week, with daily turnover averaging 39.35 billion baht.

Retail investors were net buyers of 1.7 billion baht, followed by institutional investors at 1.21 billion and brokerage firms at 1.14 billion. Foreign investors were net sellers of 4.06 billion baht.

NEWSMAKERS: Minutes from the most recent Federal Reserve meeting show officials agreeing interest rates would need to stay high for some time as they struggle to bring inflation down. Interest-rate swap market activity now points to the first rate cut happening in December at the earliest.

• The US Composite purchasing managers’ index (PMI) for May rose to a 25-month high of 54.4, supporting the view that interest rates will stay higher for longer.
• Goldman Sachs chief executive David Solomon has forecast that the Fed would not cut interest rates at all this year as the US economy has been more resilient than expected.
• UBS has lifted its gold price forecast to $2,600 an ounce by end-2024, saying pullbacks in prices have been relatively short-lived. It recommends buying at $2,300 or below.
• The crypto industry is closer to another landmark after the US Securities and Exchange Commission paved the way for the launch of exchange-traded funds investing directly in the Ether token, the biggest crypto asset after bitcoin. The price of Ether has risen 60% this year in anticipation of the move.
• The administration of President Joe Biden has announced new tariffs affecting $18 billion worth of Chinese imports effective from Aug 1, targeting sectors critical to China’s economy including electric vehicles (up from 25% to 100%) and semiconductors.
• China plans to raise import tariffs on large gasoline-powered vehicles to 25% amid high US auto tariffs on Chinese vehicles and potential higher EU duties.
• China has announced sanctions against the US plane maker Boeing and two other companies for selling arms to Taiwan. The companies were added to an “unreliable entity list” on the same day as Taiwan’s new president took office.
• Boeing shares were down sharply on Thursday after it said second-quarter performance could be “a little worse” than the first quarter, when Boeing burned through $3.9 billion in cash due to heavy operating costs and weak revenue because of reduced plane deliveries.
• The US electric vehicle maker Tesla has told suppliers to shift production out of China and Taiwan by next year due to rising geopolitical uncertainties, the Nikkei reported.
• Shares of Nvidia, the chipmaker at the centre of an artificial intelligence boom, closed above $1,000 for the first time on Thursday, after first-quarter earnings beat forecasts. Revenue more than tripled to $26 billion and second-quarter revenue would be about $28 billion, it said.
• Chinese industrial production rose 6.7% year-on-year in April, indicating a recovery in manufacturing and strong upcoming demand.
• Japan’s inflation cooled for a second month, easing to 2.2% year-on-year in April. The reading remains above the Bank of Japan’s target, and the yen’s depreciation has fuelled concerns that cost-push inflationary pressures could be prolonged.
• Japan’s manufacturing PMI rose from 49.6 to 50.5 in May, signalling improving business conditions for the first time in a year. Exports rose for a fifth consecutive month in April, climbing 8.3%, driven by cars and chipmaking equipment.
• UK inflation in April was 2.3%, slowing from 3.2% in March but higher than expected, reducing chances of a Bank of England rate cut in June as the market had expected.
• First-quarter results were stronger than expected for listed Thai companies, with net profit rising 3% year-on-year and 68% quarter-on-quarter, which could attract more funds to the SET and push the index above 1,400 points in the near term, say analysts. Aggregate profits were 276 billion baht, exceeding market estimates of 230 billion, said Yuanta Securities (Thailand).
• Finance Minister Pichai Chunhavajira says reintroducing long-term equity funds (LTFs), which come with tax advantages, will help lift the market capitalisation of the SET. Guidelines for reviving the funds have already been proposed to the Revenue Department, he said.
• Thailand’s GDP expanded by 1.5% year-on-year and 1.1% quarter-on-quarter in the first quarter of 2024, the National Economic and Social Development Council (NESDC) reported. The state planning agency downgraded its projection for 2024 to a range of 2-3%, from the previous range of 2.2% to 3.2%.
• Prime Minister Srettha Thavisin has called the first of a series of weekly meetings of the economic cabinet on Monday to discuss ideas for reviving the stalled economy after disappointing 1.5% growth in the first quarter.
• The government is working on a supplementary budget of up to 122 billion baht to help fund the digital wallet cash handout later this year, Finance Minister Pichai Chunhavajira said.
• The value of Thai exports rose 6.8% in April from a year earlier, the Ministry of Commerce said, beating analysts’ expectations. The rebound to growth, following a sharp 10.9% decline in March, was driven by the improving global economy.
• Banks’ non-performing loans reached 502 billion baht, equivalent to 2.74% of total outstanding credit, in the first quarter, an increase from 2.66% in the previous quarter, the Bank of Thailand said.
• The 10 SET-listed banks reported net loans of 13 trillion baht, an increase of 1.2% year-on-year, according to Kasikorn Research Center.
• The Ministry of Finance plans to inject an additional 12 billion baht into Thai Airways International by October, as part of a drive to have the national carrier relisted on the SET by mid-2025 at the latest.
• Thailand’s car manufacturing target for 2024 may be downgraded as production continues to dip amid slowing domestic sales and exports, said the Federation of Thai Industries. Domestic car sales plunged 21.5% year-on-year in April, after a drop of 29.8% in March. Pickup truck output in particular has slumped as lenders tighten borrowing conditions.
• The head of the Department of Internal Trade said that if the minimum wage is raised to 400 baht a day in October, businesses could seek to raise goods prices by as much as 10-15%.
• Nielsen reported overall advertising spending in Thailand grew 4% year-on-year in the first four months of 2024 to 37.9 billion baht. All media saw growth, with cinemas experiencing the highest increase due to the release of new blockbuster movies.
• MJets, a private jet operator in Thailand, is planning an expansion covering all Southeast Asian countries by 2026 after the company posted robust growth based on consistent demand from wealthy individuals and private companies.

COMING UP: On Monday, the Eurogroup (euro zone finance ministers) will meet, Canada releases wholesale figures and Australia reports monthly retail sales. On Tuesday, the US releases consumer confidence and the Bank of Japan reports core inflation.

• On Wednesday, Germany will release an inflation update, Australia will report new private capital expenditure and the New Zealand government presents its budget. On Thursday, the US reports revised quarterly GDP, personal consumption expenditure and trade data, while the euro zone will update the unemployment rate. Friday brings a euro zone inflation update and South Korean trade figures.
• Locally, the NESDC will discuss Thai social trends. On Friday, the Bank of Thailand will discuss Thai economic conditions. Also scheduled during the week are updated fiscal conditions from the Fiscal Policy Office, regional economic conditions and confidence index, and an updated industrial manufacturing index.

STOCKS TO WATCH: InnovestX Securities says investors should follow the progress on the revival of LTFs and recommends selective buys with three themes. First is big-cap stocks that are priced attractively and had good Q1 results and a good Q2 outlook. Top picks are MINT, ADVANC, TU, BEM and CPF.

• For more risk-averse investors, mid- to small-cap stocks whose Q2 profits are expected to grow include KCE, BTG, OSP, HMPRO and TIDLOR. Lastly, as Mideast tensions have eased, pushing oil prices down, there is a good opportunity to hedge. PTTEP is recommended.
• Thanachart Securities recommends defensive stocks with good profit trends, such as BH, BDMS, ITC, KCE, MINT and SCGP. Asia Plus Securities recommends retail and food stocks whose prices have fallen to the technical support, such as CPALL, BJC, CRC, DOHOME, CPALL, SYNEX and COM7.

TECHNICAL VIEW: DBS Vickers Securities sees support at 1,350 points and resistance at 1,390. Finansia Syrus Securities sees support at 1,350 and resistance at 1,380.