Wall Street bounce helps lift Asian shares

RECAP: Asian shares were poised to end a tough week on an upbeat note after Wall Street bounced overnight and data showed China taking a step away from deflation, while Japanese stocks managed to sustain an early rally.

The SET index moved in a range of 1,273.17 and 1,309.66 points this week, before closing yesterday at 1,297.07, down 1.2% from the previous week, with daily turnover averaging 43.14 billion baht.

Institutional investors were net buyers of 1.26 billion baht, followed by foreign investors at 372.2 million and retail investors at 300 million. Brokerage firms were net sellers of 1.93 billion baht.

NEWSMAKERS: Signs of a slowing US economy sowed panic among investors on Monday, with a sell-off that began the week before turning into a global rout. The Nikkei in Tokyo dropped 12.4% on the day, the most in history. However, markets steadied later in the week as fresh data reduced concerns about a US recession.

• New claims for US unemployment benefits in the week to Aug 3 fell by the most in 11 months. The news eased worries about the labour market, following earlier reports showing weak growth in payrolls in July, while the unemployment rate rose to 4.3%, the highest since October 2021.
• Several Federal Reserve officials said they disagreed that weak payroll growth indicated a recession, but they indicated the central bank should start to reduce interest rates to steady the economy.
• Goldman Sachs says a US recession is not a major concern, though it has raised the probability of one to 25% from 15%. It predicts the Fed will cut interest rates by 25 basis points at a time in September, November and December.
• The crypto roller-coaster continued, with bitcoin and others plunging to multi-month lows as investors dumped risky assets on worries about a US recession. Bitcoin at one point sank below $50,000 but had managed to climb back above $60,000 as of yesterday.
• The US non-manufacturing purchasing managers' index (PMI) increased to 51.4 in July from a four-year low of 48.8 in June, amid a bounce in new orders and the first increase in employment in six months.
• Movement in the Japanese yen remained choppy, with the currency trading in the upper 147 range to the dollar yesterday, after reaching a seven-month high of 141.7 at the start of the week. Sentiment has been fragile as investors weigh the impact of unwinding carry trades.
• The Reserve Bank of India was believed to have sold dollars this week to support the rupee as the currency hovered near its record low of 83.96 to the dollar reached on Tuesday, traders told Reuters.
• Chinese inflation rose more than expected in July, largely due to seasonal factors, leaving intact concern over sluggish domestic demand and boosting the case for more policy support. The consumer price index climbed 0.5% year-on-year, exceeding the 0.3% estimate in a Bloomberg survey.
• The Chinese services purchasing managers' index rose to 52.1 in July, beating expectations and pointing to resilience that may alleviate concerns over the economic outlook.
• Apple shares fell 4.8% on Monday after billionaire Warren Buffett's Berkshire Hathaway slashed its stake in the company by nearly 50%, raising Berkshire's cash flow to $277 billion.
• Nvidia said design flaws may delay the launch of its new AI chips by three months, affecting major customers like Meta, Google and Microsoft, with potential losses in the billions of dollars.
• Major Chinese tech companies Huawei and Baidu are reportedly stockpiling high-end chips from Samsung Electronics ahead of more US restrictions on chip exports to China.
• Toyota Motor lowered its annual global production target to 9.8 million units from the previous goal of 10.3 million, following a partial production halt due to the recent vehicle certification scandal in Japan.
• SoftBank Group posted a net loss of ¥174.3 billion ($1.2 billion) in the three months to June. The Japanese holding company has announced a buyback worth up to ¥500 billion, following a month of selloffs and pressure from activist investors to bolster its stock price.
• Honda Motor reported a 23% increase in first-quarter profit, benefiting from a weaker yen, higher pricing and growing hybrid vehicle sales in the US and its home market.
• Sony Group raised its forecast for revenue and profit in the fiscal year to March after a successful quarter for its music and gaming software divisions. Operating profit in the three months to June was ¥279 billion ($1.9 billion), up from ¥253 billion a year earlier.
• Guangzhou Automobile Group, the fifth largest automaker in China, reported July exports grew 7%, missing market expectations, affected by US and EU import tariffs.
• Taiwan Semiconductor Manufacturing Co posted second-quarter results that beat estimates amid surging demand for AI chips. Revenue was up 40% year-on-year to NT673.5 billion ($20.62 billion).
• Thailand's growing trade deficit with China is becoming a concern, says the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB). Imports from China increased 7.1% year-on-year in the first half of 2024, resulting in a deficit of 699 billion baht, up 15.7%, with impact on 23 industrial sectors, it said.
• The Board of Investment (BoI) has approved incentives for joint ventures between Thai and foreign companies to manufacture automotive parts for vehicles using all types of propulsion systems.
• South Korea-based Hyundai Mobility Manufacturing (Thailand) plans to make battery electric vehicles (BEVs) and batteries in Thailand by 2026 after its 1-billion-baht project was approved by the BoI.
• Thailand accounted for 55% of all Southeast Asia's EV sales in the first quarter, according to Counterpoint Research.
• Inflation in Thailand grew 0.83% year-on-year in July, increasing for the fourth month due to rising fuel and food prices. Average inflation in the first seven months was 0.1% year-on-year, the Ministry of Commerce said.
• The Bank of Thailand extended the 8% minimum repayment rate for credit cards for another year to the end of 2025, aiming to reduce the debt burden on households. The rate was earlier scheduled to return to 10% on Jan 1 next year.
• The BoT is collaborating with eight commercial banks to accelerate the development of financial products to help businesses transition towards sustainability and green energy use.
• Bangkok Bank is exploring virtual banking opportunities as it transitions further into digital banking services in response to changing customer behaviour.
• Funds worth 63.8 billion baht flowed into the bond market in the past two weeks, said the Thai Bond Market Association. It forecasts net fund inflows of 10 billion baht by year-end.
• The Tourism Authority of Thailand (TAT) predicts that 2.6 million Thais will travel over the three-day Mother's Day holiday to Monday, generating 9.4 billion baht in revenue, though they will be careful about spending.
• The cabinet approved a budget of 433 million baht for the TAT to promote low-season domestic travel to reduce over-reliance on foreign markets.
• The Ministry of Finance is sounding out investor interest in a new Vayupak Fund and expects to offer investment units by year-end. The initial size of the new fund will be 100-150 billion baht.
• The Ministry of Commerce reports that transport costs have risen to 13.8% of GDP. It is looking into ways to improve logistics business databases to help reduce costs and increase competitiveness.
• The consumer confidence index in July decreased for the fifth month to an 11-month low due to political concerns, unclear economic stimulus measures and high energy prices, according to the University of the Thai Chamber of Commerce.
• The investor confidence index for the next three months is in the sluggish zone in light of international conflicts, US interest rate uncertainty and weak economic conditions at home, says the Federation of Thai Capital Market Organizations.
• Nearly 25 million people, or half the total eligible, have registered so far for the 10,000-baht digital wallet handout, according to Deputy Minister of Finance Julapun Amornvivat. The application process has gone smoothly and everything is still on schedule for an October launch, he said.
• Fuel consumption in Thailand in the first half of 2024 decreased by 0.05% year-on-year. Fuel oil, NGV and gasoline usage dropped, while commercial aviation fuel, LPG and diesel consumption rose.

COMING UP: On Monday, the US will release updated federal budget data and the Organization of Petroleum Exporting Countries (Opec) will release its monthly output report and outlook. On Tuesday, the US reports producer prices, the Reserve Bank of New Zealand has a rate meeting and the UK releases unemployment data. Due on Wednesday are US and UK inflation figures, Japanese GDP, and Chinese fixed-asset investment, industrial production and unemployment. On Thursday, the UK will release quarterly GDP. On Friday, the UK reports core retail sales and the US releases an inflation expectations survey.

STOCKS TO WATCH: Trinity Securities recommends four investment themes for August:

• 1. Refineries (TOP, BCP and SPRC) for which valuations have fallen significantly and earnings are believed to have bottomed out in the second quarter.
• 2. Power plant shares (GULF, GPSC and BGRIM) as news about an electricity tariff freeze has already been priced in, while positive sentiment has followed adjustment in bond yields.
• 3. Food and agricultural product exporters that have performed consistently well, including STA, NER, TEGH, COCOCO, AAI, ITC, TU, GFPT, CPF and KCE.
• 4. Hospital operators (BDMS, BH, BCH and CHG), whose low beta shares are suitable for hedging against domestic political factors, while the third-quarter high season is under way.
• Asia Plus Securities recommends accumulating stocks that have benefited from the strong baht and downward interest rate trend such as GULF, GPSC, BGRIM and MTC. It also suggests accumulating low-volatility or high-dividend stocks such as BDMS, ADVANC, LH, SIRI and PTTEP.

TECHNICAL VIEW: InnovestX Securities sees support at 1,270 points and resistance at 1,325. Asia Plus Securities sees support at 1,288 and resistance at 1,350.