Asian shares ease back on profit-taking

RECAP: Asian shares ended the week with a whimper after a recent rally to 26-month highs drew profit-taking, while the relentless strength in the US dollar pushed the Japanese yen towards the intervention zone.

Thai shares finished marginally above 1,300 points on Friday after falling below 1,300 during the week as political uncertainty, particularly the legal case against Prime Minister Srettha Thavisin, dragged down investors' confidence.

The SET index moved in a range of 1,281.87 and 1,311.31 points this week, before closing on Friday at 1,306.41, unchanged from the previous week, with daily turnover averaging 50.7 billion baht.

Retail investors were the net buyers of 7.75 billion baht, followed by brokerage firms at 865.67 million and institutional investors at 480.59 million. Foreign investors were net sellers of 9.10 billion baht.

NEWSMAKERS: Microsoft and the chip maker Nvidia continue to jostle for the title of the world's most valuable company, with the former edging back into the lead on Thursday with a market capitalisation of $3.3 trillion. Apple also remains in the running with a market cap above $3 trillion.

• US initial jobless claims fell by more than expected last week, indicating a slowing labour market. Retail sales barely rose in May, suggesting economic activity remained lacklustre and bolstering the case for interest-rate cuts by the Federal Reserve this year.
• The University of Michigan US consumer confidence index in June fell to 65.6, far below forecasts of 71.5, and compared with 69.1 in May.
• Despite growing signs of a slowdown, two Fed presidents -- Neil Kashkari in Minneapolis and Patrick Harker in Philadelphia -- have signalled there will be just one rate cut this year.
• France's finance minister has warned of a financial crisis if the far-right or far-left win parliamentary elections, as both plan large spending programmes. European Central Bank president Christine Lagarde said it was monitoring developments after French stock markets plunged amid political unease.
• The Bank of England kept interest rates at a 16-year high of 5.25% on Thursday, but opened the door to cutting rates in August for the first time in more than four years as inflation has fallen to 2%.
• British public debt rose last month to its highest level since 1961, at 99.8% of GDP, adding to the financial pressures the country's next government will face after the election on July 4.
• The Swiss National Bank on Thursday cut interest rates for a second time by 25 basis points to 1.25% in response to cooling inflation which fell to 1.4% in May.
• Global foreign direct investment fell by 2% last year to $1.3 trillion, the UN Conference on Trade and Development (Unctad) said, citing increasing geopolitical tensions amid a slowing global economy.
• The Bank of Japan kept its policy rate at a maximum of 0.1% after raising rates for the first time in 17 years at its March meeting. It indicated it may raise rates in July, as inflation accelerated to 2.5% in May, from 2.2% in April.
• The People's Bank of China left its key lending rates unchanged, as recent data showed mixed signs of economic recovery. The central one-year loan prime rate remains at 3.45%, unchanged since August 2023, and the five-year rate is 3.95%.
• Japan's exports in May grew at the fastest rate since late 2022 as the weak yen boosted their value. Exports rose 13.5% year-on-year, outpacing forecasts of a 12.7% increase.
• The number of foreign visitors to Japan totalled 3.04 million in May, up 60% from a year earlier and exceeding the 3 million mark for the third consecutive month, boosted by the weak yen, the Japan National Tourism Organization said.
• The European Automobile Manufacturers' Association reported a 3% decline in new car sales in May as new battery electric vehicle (BEV) sales fell 12% year-on-year.
• Syntun, a digital retail data company, reported a 7% year-on-year fall in sales during China's "618" midyear shopping festival, the first decline in eight years, signalling continued weakness in consumer spending.
• WeLab, a Hong Kong-based fintech unicorn backed by billionaire Li Ka-shing, is exploring the idea of setting up digital banks across Southeast Asia and providing its technology services to conglomerates in Thailand, Malaysia, Vietnam and the Philippines.
• The dollar value of Thai exports rose 7.2% in May from a year earlier, beating analysts' expectations, after a 6.8% increase in April.
• Nine companies were added to the SET100 index this week: Sky ICT (SKY), Jasmine International (JAS), Bangkok Airways (BA), Berli Jucker (BJC), CK Power (CKP), MBK (MBK), Prima Marine (PRM), Quality House (QH), and Dhipaya Group Holdings (TIPH).
• The Ministry of Finance said the government is considering measures to stimulate the stock market, including revising Long-term Equity Fund (LTF) conditions to shorten the holding period, or adjusting the ThaiESG fund to attract more investors.
• An uptick rule will take effect on the SET on July 1, allowing short-selling of securities only at prices higher than the last trade, instead of at or above the last price currently. However, a circuit-breaker rule for individual stocks was postponed to the third quarter, while an auto trading halt rule will take effect in the first quarter of 2025.
• Prime Minister Srettha Thavisin this week asked parliament to approve a deficit-heavy 3.75-trillion-baht budget for fiscal 2025 to boost the economic recovery.
• Bank of Thailand governor Sethaput Suthiwartnarueput has reiterated his proposal that the government's costly digital wallet scheme be limited to around 15 million holders of state welfare cards, instead of 50 million Thais aged 16 and up, to better aid those truly in need.
• Finance Minister Pichai Chunhavajira is planning to discuss the inflation target with the central bank governor. The latter has said that any push to tweak the current target of 1-3% could change expectations and result in quickening price gains, which could mean higher interest rates.
• Fitch Ratings has downgraded the outlook for the Thai banking sector to neutral from improving, citing a subdued pace of economic recovery that is likely to constrain earnings growth.
• An industry source familiar with Alibaba and the e-commerce industry said the company was in talks with Central Group and Charoen Pokphand (CP) to sell its stake in Lazada Thailand, following intensifying competition in the local market. Lazada, however, has denied the reports.
• Government revenue for the first 8 months of fiscal 2024, to May 31, was 1.67 trillion baht, 1.5% below estimates, mainly due to lower excise tax collections, said the Ministry of Finance.
• Kasikorn Research Center (K-Research) predicts Thailand's manufacturing production index will contract by 2% this year, marking the second consecutive year of decline.
• Thailand's industrial confidence index fell in May for the second month due to fragile purchasing power, economic uncertainty, high household debt and high oil prices affecting production costs.
• The Ministry of Transport is considering delaying a planned increase of 5-15 baht in Don Muang Tollway fees, scheduled to start in December, to reduce the impact on the cost of living.
• The board of the State Railway of Thailand has approved in principle three double-track rail construction projects spanning 678km with a total budget of around 165 billion baht.
• The Tourism Authority of Thailand (TAT) said foreign tourist arrivals to June 16 reached 16.2 million, generating 766 billion baht in revenue. The top five source markets were China, Malaysia, India, Russia and South Korea.

COMING UP: Singapore will release inflation figures and the Euro Group finance ministers will meet on Monday. On Tuesday, the US will release a consumer confidence update and Japan will report core inflation. On Wednesday, the US will release new home sales and building permits, and the Fed will release bank stress test results. On Thursday the US will release a quarterly GDP update, May durable goods orders and pending home sales. Friday brings UK quarterly GDP, and US personal consumption expenditure data.

• Locally, InnovestX Securities will hold a briefing about the third-quarter investment outlook on Monday. On Tuesday, the Federation of Thai Industries holds a press conference.

STOCKS TO WATCH: Asia Plus Securities recommends dividend plays as political issues are pressuring the market. Over the past month, it notes, the SET was down 5.1% and the MAI index dropped 7.6%, while the SETHD (high dividend) index fell just 1.8%.

• Krungsri Capital Securities (KCS) recommends investors gradually accumulate stocks based on two themes. First is firms with a stable business outlook and dividend yields of more than 4%. Top picks are SCB, AP, ICHI, PTT, BBL, INTUCH, ADVANC, HMPRO, BJC, WHA and TU.
• The second theme is stocks that have underperformed the market even as their medium- to long-term fundamentals are still strong: BTS, IVL, LH, HMPRO, KCE, PTTGC, GPSC, HANA and GULF.

TECHNICAL VIEW: Asia Plus Securities sees support at 1,275 points and resistance at 1,350. InnovestX Securities sees support at 1,280 and resistance at 1,330.