Big Tech sell-off takes toll on Asian equities

RECAP: Asian equities were mixed on Friday as traders weighed the rising expectations of US interest rate cuts against continued weakness in technology shares after a protracted run-up in prices.

The SET index rebounded significantly on Friday ahead of a three-day holiday, after slipping below 1,300 points on Wednesday, when the government's announcement of details of its digital wallet scheme failed to boost trading.

Thai shares moved in a range of 1,288.22 and 1,321.21 points this week, before closing on Friday at 1,307.21, down 0.8% from the previous week, with daily turnover averaging 37.43 billion baht.

Retail investors were net buyers of 1.55 billion baht, followed by brokerage firms at 274.95 million and foreign investors at 233.18 million. Institutional investors were net sellers of 2.06 billion baht.

NEWSMAKERS: The US economy grew 2.8% in the second quarter, well above the consensus forecast of 2.1%, amid solid gains in consumer spending and business investment. Inflation pressures subsided, leaving intact expectations of a September interest-rate cut by the Federal Reserve.

• Consumer spending, which accounts for more than two-thirds of the US economy, rose 2.3% in the second quarter after slowing to a 1.5% pace three months earlier, boosted by increased outlays on healthcare, housing and utilities.
• The People's Bank of China unexpectedly lowered the cost of its one-year policy loans by the most since April 2020, acting days after cutting a key short-term rate in a sign of greater support for the slowing economy.
• China will allocate 300 billion yuan ($41.4 billion) in ultra-long treasury bonds to support incentives for equipment upgrades and consumer goods trade-ins, in the latest step to spur an economic recovery.
• Japan's Nikkei 225 Stock Average tumbled 3.3% on Thursday, the most since June 2021, taking its drop to about 10% from an all-time peak hit just two weeks ago, as concerns grew that the Bank of Japan (BoJ) may be poised to hike interest rates.
• The BoJ is expected to debate on Wednesday whether to raise interest rates and unveil a plan to halve bond purchases, as it starts to steadily unwind its massive monetary stimulus.
• General Motors' profit surged 60% from a year ago, easily beating forecasts on strong US demand for gasoline-powered trucks. It raised its earnings guidance by $500 million to as much as $15 billion for this year.
• Tesla reported a big drop in second-quarter profits due to the effect of price cuts, while spending aggressively on autonomous driving and other technology. The EV maker reported profits of $1.5 billion, down 45%, on revenues of $25.5 billion, which were up 2%.
• Nissan Motor on Friday cut its operating-profit outlook to ¥500 billion ($3.3 billion) for the year through March 2025, down from its prior forecast of ¥600 billion, due to weak sales in Japan and the US.
• Honda Motor Co said it would close a factory in China and halt vehicle production at another plant, as it seeks to start producing more electric vehicles amid heavy competition from Chinese brands.
• Google parent Alphabet reported second-quarter earnings that beat estimates, with operating profit topping $1 billion for the first time. Earnings per share rose 31% year-on-year to $1.89 on revenue of $84.7 billion, up 14%.
• Deutsche Bank reported a 143-million-euro loss in the second quarter, its first quarterly loss in four years, and said it would probably refrain from conducting a second share buyback this year.
• Shares of the luxury goods conglomerate LVMH tumbled 6.5% to a six-month low on Wednesday after sales in China plummeted during the second quarter. Sales in the region that includes China fell 14% in the quarter.
• Baoshan Iron & Steel, China's biggest steel producer, said it had more than doubled its investment in a steel plate venture in Saudi Arabia to $1 billion.
• India has cut its import tax on gold to 6% from 15% to support jewellery manufacturing in the world's second-biggest consumer of the precious metal.
• Indonesia launched a long-term "golden visa" scheme on Thursday intended to attract foreign investors with amounts of up to $10 million giving them a 10-year visa and access to Southeast Asia's largest economy. Individuals can obtain a 5-year visa for a minimum investment of $350,000.
• Thailand's economy is expected to grow by 2.7% in 2024, up from a previous forecast of 2.4%, due to higher foreign tourist arrivals and exports, Deputy Finance Minister Paopoom Rojanasakul said on Friday.
• The value of approved investments rose by 35% year-on-year to 458 billion baht in the first half of 2024, led by makers of electrical appliances and electronics, with total applications soaring by 64% to 1,412, the Board of Investment said on Thursday.
• The Federation of Thai Industries has cut its car manufacturing target for 2024 to 1.7 million units, from 1.9 million forecast earlier. Output fell 17.3% year-on-year to 761,240 units in the first half. Domestic sales in the first half sank 24.4% to 308,027 units, reflecting the impact of high household debt and tighter lending rules.
• The 10 SET-listed banks reported a combined net profit of 126.4 billion baht for the first half, up 3.7% year-on-year. Growth was primarily driven by large banks.
• Embattled Energy Absolute (EA), which has been under investigation for alleged fraud involving former executives, has rescheduled payment of two tranches of short-term bills of exchange (B/E) worth 600 million baht, citing tight liquidity.
• The SET, the SEC and the Anti Money-Laundering Office (Amlo) plan to step up crackdowns on stock manipulation and financial statement fraud starting in August. This will include asset seizures before investigation, and a special task force using AI to examine financial statements, report information and alert investors.
• Thai exports on June fell 0.3% year-on-year, the first decline in three months, reflecting slowing agricultural and food sales, but the Ministry of Commerce still expects exports to grow overall in 2024.
• Siam Cement Group (SCG), has halved its revenue growth target to 10% this year due to a raft of factors, including the domestic economic slowdown and sluggish sales in the petrochemical industry.
• A soft loan scheme administered by the Government Savings Bank has initially attracted demand of 70-80 billion baht out of the 100-billion-baht total. The funds can be borrowed by commercial banks at low rates for on-lending to small businesses at an interest rate of no more than 3.5%.
• The Ministry of Finance said citizens with smartphones can register for the 10,000-baht digital wallet handout from Aug 1 to Sept 15 through the government-run Tang Rath app. Those without smartphones can register from Sept 16, using their ID cards. Stores can register from Oct 1.
• The cabinet approved a cap on electricity bills at 4.18 baht per kilowatt-hour (unit) for September-December 2024, with a special rate of 3.99 baht per unit for consumers using less than 300 units per month. The diesel price cap remains at 33 baht a litre.
• The Thai Hotels Association says the country had welcomed 18 million foreign tourists as of mid-July, up 34% year-on-year. The top five nationalities are China, Malaysia, India, South Korea and Russia.
• The Ministry of Finance is considering a framework for selling government-held shares of non-listed companies, initially involving 25 companies worth 20 billion baht. Some shares not only fail to generate additional income but also incur maintenance costs.

COMING UP: On Tuesday, Germany will releases quarterly GDP and monthly inflation, and the US will update the consumer confidence index, and China will release manufacturing PMI. Wednesday brings euro zone inflation and the release of minutes of the last Fed policy meeting. The Bank of England holds a policy meeting on Thursday, and on Friday the US will release July non-farm payroll and unemployment data.

• Locally, the SEC on Tuesday will hold a media briefing and the SET will discuss lifting its SETESG ratings to the global standard. On Thursday, the SET holds a conference on "Family Business in Globalised Asia". On Friday, Nissan Motor (Thailand) will announce its business plan.

STOCKS TO WATCH: InnovestX Securities recommends four investment themes. First is earnings plays in companies poised for quarterly and annualised earnings growth, with inexpensive valuations, including MINT, BEM, OSP, TU, KCE, CPF and TRUE. The second is stocks expected to benefit from short covering now that the uptick rule is in effect, and with strong fundamentals and SETESG ratings between AAA and A, namely HANA, TOP, BEM, MINT, OSP, BBL and AOT.

• The third group comprises stocks expected to benefit from the adjustment of Thai ESG Fund conditions, such as ADVANC, AOT , CPALL, BDMS, BBL, KTB and GULF. Finally, oil stocks can be a good hedge against risks as Brent crude has recovered. The top pick is PTTEP.
• Asia Plus Securities notes foreign investors have gradually bought Thai stocks through NVDRs worth up to 12 billion baht this month. The top 10 most purchased stocks were CPALL, BBL, DELTA, TRUE, CPF, ADVANC, KBANK, IVL, PTTGC and COM7.

TECHNICAL VIEW: Phillip Securities sees support at 1,285 points and resistance at 1,330. InnovestX Securities sees support at 1,285 and resistance at 1,320.