Asian shares recover on hopes for policy support

RECAP: Asian stocks recovered on Friday after a three-day selling streak, boosted by a decline in US Treasury yields and weakness in the dollar amid optimism for more policy support after disappointing economic data from the US, China and Japan.

The SET once again slipped below a key resistance of 1,350 points as growing political uncertainty hurt investor confidence. The index moved in a range of 1,340.83 and 1,369.68 points this week, before closing yesterday at 1,345.66, down 1.4% from the previous week, with daily turnover averaging 56.97 billion baht.

Retail investors were net buyers of 5.93 billion baht, followed by institutional investors at 1.12 billion and brokerage firms at 623.34 million. Foreign investors were net sellers of 7.67 billion baht.

NEWSMAKERS: The dollar steadied after a downward revision to US first-quarter GDP suggested room for the Federal Reserve to cut interest rates this year. The US economy grew by 1.3% year-on-year, versus a preliminary estimate of 1.6%, after downward revisions to consumer spending.

• Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said he wanted to see more data over the next several months to ensure US inflation is slowing before supporting a cut in interest rate. He did not rule out the possibility of a rate hike if inflation picks up again.
• European Central Bank (ECB) officials have signalled a rate cut at their June 6 meeting as inflation is trending downward towards the 2% target, allowing the ECB to cut rates faster than the Fed.
• China has established a $47.5-billion fund for the third phase of an integrated investment campaign to promote domestic semiconductor, AI, 5G wireless and quantum computing industries.
• Shanghai announced policies to revive its real estate sector by reducing down payments to 20% for first homes and 30% for second homes, along with lowering mortgage rates. The city of Tianjin lowered the minimum down payment to 15% for first homes and 25% for second homes.
• China is looking into dumping of pork from the EU, which supplied more than half of the 1.55 million tonnes of pork the country imported last year, escalating trade tensions.
• Saudi Arabia is preparing to sell shares in the oil giant Saudi Aramco, which is still 90% government-owned, as early as this month, expected to raise around $10 billion.
• The yield of Japan's benchmark 10-year government bonds hit a 13-year peak of 1.1% on Thursday, as expectations grew for more monetary tightening by the Bank of Japan.
• The International Monetary Fund has lifted its forecast for Chinese economic growth to 5%, from 4.6% previously, reflecting strong expansion at the start of 2024 and additional support from the government.
• China's manufacturing purchasing managers' index slipped to 49.5 in May from 50.4 in April, despite strong exports and supportive policies aimed at boosting domestic demand.
• The Chinese yuan was trading near a six-month low at 7.249 per dollar, as broad greenback strength in global markets offset state banks' efforts to underpin the local currency.
• Fosun International, one of China's largest private-sector conglomerates, said it would sell the German lender Hauck & Aufhauser Lampe to the Dutch bank ABN Amro for €672 million.
• Nvidia shares hit a record high amid speculation on an upcoming 10:1 stock split and optimism that it will become a major supplier of AI chips to companies like xAI. Apple shares also rose after iPhone shipments in China rebounded 52% in April following price cuts.
• Elon Musk's artificial intelligence company, xAI, said it had raised $6 billion, helping to close the funding gap with OpenAI, Anthropic and other rivals in the red-hot industry.
• Google confirmed on Thursday that it would invest $2 billion in Malaysia to establish its first data centre and "cloud region" in the country.
• Toyota Motor's global sales and production fell 0.5% year-on-year in April, as a 27% slump in China and a 14% drop in Japan offset double-digit growth in the US and Europe.
• Public policies such as a carbon tax, and innovations including artificial intelligence and nuclear power are critical for Thailand's bid to achieve its zero-carbon emissions goals, Charoen Pokphand Group chief executive Suphachai Chearavanont said on Thursday.
• Goldman Sachs expects the Bank of Thailand to start cutting interest rates in the first half of 2025 instead of the second half this year, as government plans to spend more to support growth reduce pressure on the central bank to cut rates.
• The cabinet approved a supplementary budget of 122 billion baht, with an additional 112 billion baht in borrowing to help fund the digital wallet, increasing public debt to 68% of GDP.
• Thailand's Manufacturing Production Index is expected to remain flat or rise 1% year-on-year in 2024, with climate change among the risks threatening the sector, the Office of Industrial Economics said.
• Amazon Web Services is ready to launch its new data centre in Thailand by early next year as part of a commitment announced in 2022 and will invest more than 190 billion baht in the country through 2037.
• Diesel prices rose yesterday by another 50 satang to 32.94 baht a litre, as energy policy makers declined to increase the subsidy any further. The government had said earlier it would cap diesel prices at 33 baht, but the Oil Fuel Fund has now run up debts of 111 billion baht from subsidising fuel prices.
• The National Economic and Social Development Council has voiced concern about rising household debt, which has now reached 91% of GDP, amid declining incomes.
• The Ministry of Finance is considering amending the law to help those with bad credit histories regain access to loans faster, as currently those with bad debt are blacklisted for 8 years.
• The cabinet has expanded visa-free stays for up to 60 days for nationals of 93 countries to promote tourism. It has also reduced the health-insurance requirement for foreign retirees and will allow foreign students in Thai universities to stay in the country for a year after they graduate.
• The Tourism Authority of Thailand said foreign tourist arrivals from May 20-26 rose 4.3% from the week before, bringing the year-to-date total to 14.3 million, generating around 683 billion baht in revenue.
• The Ministry of Finance will study the sale of over 30 billion baht worth of shares held by the state, focusing on assets obtained from court cases and seizures, to realise their economic value.
• The tourism revival helped support listed companies, which reported aggregate first-quarter revenue growth of 4.6% year-on-year to 4.4 trillion baht, with net profit up 1.7% to 265 billion baht. The SET said 646 companies reported net profits, nearly 80% of the total.
• The Ministry of Finance expects land and building tax collections this year to total 43 billion baht, 8 billion higher than last year, as the tax discount has been discontinued.
• SET-listed Ratch Group, a power generation arm of the Electricity Generating Authority of Thailand, expects to soon finalise six new deals to acquire power plants with a combined capacity of 550 megawatts in Thailand, Indonesia, Laos, the Philippines and Australia.
• Krungthai Asset Management has joined with Kiatnakin Phatra Securities to launch private funds in the US, aiming to capture high returns in the growing private credit business there.

COMING UP: Due Monday are US, euro zone and UK manufacturing PMI updates, British retail sales and Australian current account. On Tuesday, the US releases monthly factory orders, China reports services PMI and Australia releases a GDP update. On Wednesday, the US non-farm employment, services and non-manufacturing PMI. The Bank of Canada has an interest rate meeting and Russia reports monthly GDP.

• On Thursday, the European Central bank holds a rate meeting and is widely expected to approve a reduction. Japan will report household spending for April and China will release a trade update. On Friday, the US reports May non-farm payrolls, average wages and unemployment rate.

STOCKS TO WATCH: Yuanta Securities recommends stocks that are likely to continue to grow of businesses expected to see continued growth in June, including transport plays related to freight rates, container and freight forwarding, for which prices have lagged. The top pick is WICE.

• Export-related stocks, particularly those related to rubber prices, include STA, NER and TEGH. Also interesting are food and beverage stocks, such as COCOCO and PLUS. In electronics, Yuanta recommends HANA.
• Upstream energy and refinery stocks are expected to see speculation in relation to the oil price trend, which is driven by the driving season, demand in China and geopolitical factors. Recommended stocks are PTTEP, SPRC and BSRC.
• In addition, Yuanta says, investors should diversify their portfolios to avoid impacts of domestic political uncertainty. Assets such as Korean funds (SCBKEQTG), AI funds (MEGA10AI) and Depositary Receipts like STEG19 are recommended.

TECHNICAL VIEW: InnovestX Securities sees support at 1,330 and resistance at 1,375. DBS Vickers Securities sees support at 1,330 and resistance at 1,384.