China shares lead regional decline as risk rises

RECAP: Asian equities and currencies declined on Friday as economic and geopolitical risks trumped market optimism surrounding US interest-rate cuts. Mainland Chinese stocks in Hong Kong led the region's losses as the Communist Party's third plenum failed to convince investors about economic growth impetus.

The SET index moved in a range of 1,317.14 and 1,330.84 points this week, before closing on Friday at 1,317.14, down 1.1% from the previous week, with thin daily turnover averaging 39.02 billion baht.

Retail investors were net buyers of 2.48 billion baht, followed by foreign investors at 1.48 billion and brokerage firms at 323.1 million. Institutional investors were net sellers of 4.28 billion baht.

NEWSMAKERS: President Xi Jinping this week vowed to make "high-quality development" the guiding force of China's economy, showing few initial signs that top leadership is preparing to announce major steps to boost demand or arrest the property slump.

• China's economy grew much slower than expected in the second quarter as the property downturn and job insecurity knocked the wind out of a fragile recovery. GDP expanded 4.7%, slowing from 5.1% in the previous quarter.
• Chinese new home prices in June fell by 4.5%, the most in nine years, but pre-owned secondary homes in Beijing and Shanghai recorded price increases for the first time this year. Data also showed a narrowing decline in the contraction in prices in first-tier cities.
• The European Central Bank kept interest rates unchanged as expected on Thursday but said the outlook for the September meeting was "wide open" as it downgraded its view of euro zone economic prospects and predicted that inflation would keep falling.
• US Federal Reserve governor Christopher Waller said on Wednesday that the time for an interest-rate cut "is drawing closer", but uncertainty about the path of the economy makes it unclear when it might happen.
• The US consumer confidence index for July fell to 66.0, an 8-month low and below market expectations. Retail sales in June increased 2.3%, higher than expectations.
• Gold prices dipped on profit-taking on Thursday after scaling an all-time high on Wednesday, with recent comments from Fed officials boosting bets of a US rate cut in September. Spot gold hit a peak of $2,473.18.
• Chip stocks in Asia, including Taiwan Semiconductor Manufacturing Co (TSMC), tumbled on Thursday after reports that the United States was considering tighter curbs on exports of advanced semiconductor technology to China.
• TSMC has lifted projections for 2024 revenue growth from a the maximum mid-20% range it had signalled previously. The world's largest contract chipmaker saw second-quarter revenues growing 32% year-on-year to $20.82 billion.
• Internet Data Center (IDC) reports global smartphone shipments increased by 6.5% year-on-year in the second quarter to 285.4 million units. Apple's shipments grew 1.5% to 45.2 million, boosted by price reductions and promotions.
• The International Monetary Fund (IMF) revised up its Thailand GDP growth forecast to 2.9% in 2024 and 3.1% in 2025, from 2.7% and 2.9% predicted in April, as it expects major Asian economies to grow strongly. China is projected to expand 5% this year and 4.5% next year, while Indian GDP is forecast to grow at 7% and 6.5%, respectively.
• Gulf Energy Development and Intouch Holdings on Wednesday announced a merger to maximise benefits in both energy and telecoms businesses. They plan to establish a new company the second quarter of next year.
• Thai Beverage, Southeast Asia's biggest brewer, plans to divest its real estate assets and become a pure-play drinks and food company in a share swap with other companies held by the TCC Group of billionaire Charoen Sirivadhanabhakdi.
• Analysts expect banks to report combined earnings of 61 billion baht in the second quarter, down 2% from three months earlier and flat year-on-year, due to lower interest income, slowing lending and rate cuts to aid retail customers.
• The Department of Business Development reported a 2% year-on-year drop in new business registrations in the first half, with value down 66%. Business closures rose by 1.5% year-on-year, but value shot up 55%. The department still expects new business formation to increase 5-15% this year, in line with targets.
• The Ministry of Energy said that despite rumours of an increase, the government's policy is to maintain the electricity rate at 4.18 baht per kilowatt-hour (unit) in the September-December period to avoid burdening consumers and businesses.
• Energy Absolute (EA) founder and CEO Somphote Ahunai and his deputy Amorn Sapthaweekul resigned after the Securities and Exchange Commission (SEC) said it was investigating them and other executives for possible fraud in connection with company procurement a decade ago. They denied the wrongdoing.
• The Chinese EV maker GAC Aion on Wednesday opened its first factory in Thailand, a key regional auto export and assembly hub and fast-growing EV market.
• The industrial confidence index in June fell for the third month to a 24-month low due to a slow economic recovery and weak consumer purchasing power.
• The House approved a supplementary budget of 122 billion baht, most of which will go to the digital wallet scheme to stimulate the economy. Registration for the digital wallet will begin on Aug 1 through a government app. Full details will be announced on July 24.
• The Real Estate Information Center (REIC) said the standard house construction cost index rose 1.2% quarter-on-quarter in the three months to June and 3.8% year on year, showing that standard home construction costs continue to rise, albeit at a slower pace this quarter.

COMING UP: On Tuesday, the US will release an existing home sales update, followed on Wednesday by new home sales, manufacturing and services PMI and crude oil inventories. The Bank of Canada will hold an interest rate meeting on Wednesday. Thursday beings a US quarterly GDP update and durable goods orders. On Friday, the US reports core personal consumption expenditures, the Fed's preferred inflation gauge.

• Locally, SCG and LH Bank on Thursday will discuss second-quarter results and business outlook. American Express will hold a briefing about Thai travel trends.

STOCKS TO WATCH: Bualuang Securities recommends stocks that have Q2 and Q3 profit growth prospects and are still priced cheaply. Promising sectors are food and beverages, retail, telecommunications, and hospitals. Interesting stocks are ITC, COCOCO, OSP, CPALL, ADVANC, INTUCH and BH.

• Krungthai XSpring Securities believes foreign investors are delaying sales of Thai stocks as the economy is expected to recover soon, thanks to stimulus. Stocks with good fundamentals at low prices are MINT, CPALL, BEM, BDMS and ADVANC.
• Asia Plus Securities recommends ESG stocks that mutual funds have invested in, including CPALL, GULF, PTTEP, CPN and BDMS, as well as stocks with high ESG scores and a positive outlook including STA and AMATA.

TECHNICAL VIEW: InnovestX Securities sees support at 1,300 points and resistance at 1,350. Pi Securities sees support at 1,310 and resistance at 1,340 points.