Asian equities gain on hopes for Fed pause

RECAP: Most Asia-Pacific equity markets rose on Friday to their highest level since mid-February, taking cues from an overnight Wall Street rally as bets firmed that the US Federal Reserve would not raise interest rates next week.

Thai stocks improved as foreign investors returned to net buying for three consecutive days as inflation fell to a 21-month low. The SET Index moved in a range of 1,522.30 and 1,559.50 points this week before closing on Friday at 1,555.11, up 1.56% from the previous week, with daily turnover averaging 47.89 billion baht.

Foreign investors were net buyers of 2.35 billion baht, followed by institutions at 2.02 billion. Retail investors were net sellers of 3.97 billion baht, followed by brokers at 400.05 million.

NEWSMAKERS: Global economic growth will pick up only moderately by 2.9% next year as the full effects of central bank interest-rate increases are felt, says the Organisation for Economic Cooperation and Development. It forecasts GDP growth of 2.7% this year.

• The World Bank has cut its 2024 world GDP forecast to 2.4% from 2.7% due to tighter monetary policy, but raised its forecast for 2023 to 2.1% from 1.7%, though this remains lower than the 3.1% expansion seen last year.
• US employers added 339,000 jobs in May, the highest since October 2021, surpassing forecasts of 190,000 and signalling continued labour market strength despite Federal Reserve efforts to cool the economy. But weekly jobless claims also surged, suggesting the Fed could leave rates untouched this week.
• FedWatch Tool sees a 30% probability that the Fed will raise its benchmark rate by 25 basis points at its June 13-14 meeting. Unexpected hikes this week in Canada and Australia have renewed worries about the persistence of inflation.
• Australia's central bank raised interest rates by a quarter-point to an 11-year high of 4.1%, and warned that further tightening may be required to ensure that inflation returns to target.
• Gold prices dipped Friday on profit-taking after jumping more than 1% on Thursday on expectations that the Fed will pause its tightening cycle. Spot gold was quoted at $1,965 an ounce in New York.
• Apple on Monday unveiled a mixed-reality headset, priced at a whopping $3,500. In line with Steve Jobs' maxim that the company's aim is to find out what people want before they know they want it, it believes the Vision Pro will give it the edge in the new "spatial computing" world.
• Passenger vehicle sales in China rose 7.3% in May from a month earlier, as the government extended tax incentives to shore up demand amid a flagging economic recovery. Sales of new energy vehicles, which include battery-powered cars and petrol-electric hybrids, rose 10.5% and accounted for 33% of total May sales.
• The Opec+ alliance has extended its oil production cuts to the end of next year to support prices, while Saudi Arabia will cut output by another 1 million barrels per day starting in July. Riyadh wants to keep world prices between $80 and $90 a barrel but analysts say weak fundamentals point to lower prices by year-end.
• China increased its gold reserves for a seventh straight month, signalling ongoing strong demand from the world's central banks. Total stockpiles at the People's Bank of China now sit at 2,092 tonnes.
• Japanese investors plan to file lawsuits against Japan-based brokerages including Mitsubishi UFJ Morgan Stanley Securities over their sale of so-called AT1 bonds issued by Credit Suisse, Nikkei Asia reports.
• Japanese GDP in the January-March quarter grew 2.7% year-on-year, significantly better than the preliminary estimate of 1.6%, reflecting strong corporate spending.
• Toshiba said on Thursday that its board would recommend that shareholders take up a tender offer from a consortium led by the private-equity firm Japan Industrial Partners (JIP). The board earlier this year accepted the buyout offer, which values the conglomerate at ¥2 trillion ($14.3 billion).
• The Japanese machinery maker Kubota has issued $500 million in dollar-denominated bonds, its first since 1992, to meet its increasing capital needs in the US as sales of its farm and construction equipment grow.
• Honda Motor aims to offer an electric vehicle in India within three years as part of the Japanese automaker's bid to capture growing demand for EVs in a major global market.
• The Japanese government aims to attract ¥15 trillion ($107 billion) worth of investment in the supply of hydrogen over the next 15 years from the public and private sectors in a push to increase its use and speed up decarbonisation.
• Chinese consumer prices broke a three-month fall to increase marginally in May, even as headwinds slow a post-Covid recovery amid market expectations for stimulus measures. The Consumer Price Index rose 0.2% from a year earlier.
• Major Chinese state-owned lenders on Thursday reduced interest on deposits across the board, a move widely seen as a harbinger of a policy rate cut by the central bank.
• Isuzu Motors, the pickup truck sales leader in Thailand, confirmed it has no plan to relocate a manufacturing base to Indonesia. The Japanese automaker issued the denial in response to a claim by Indonesia's industry minister.
• The Thai stock market is experiencing the third-highest fund outflows in the world this year amid heavy sell-offs following the election, says Asia Plus Securities. It said 100 billion baht in foreign funds had flowed out of the SET since the start of the year, including 41 billion over the past 18 working days.
• Consumer confidence rose for a 12th straight month in May and hit the highest since March 2020, boosted by a gradually recovering economy and a resilient tourism sector.
• The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) kept its 2023 GDP forecast at 3% to 3.5%, backed by the recovering tourism sector, but it expects exports to contract by up to 1%.
• Fuel consumption in the first four months of the year rose 3.1% from the same period a year ago, the Department of Energy Business said, signalling economic recovery. Jet fuel consumption is moving closer to 2019 levels as tourism revives.
• The Tourism Authority of Thailand (TAT) reported foreign tourist arrivals in the first five months reached 10.57 million, with 1.97 million in May alone.
• The TAT aims to use its budget of 5 billion baht in fiscal 2024 to increase the number of off-peak visitors, increase spending per trip by 7% and distribute income to a greater variety of destinations.
• The Federation of Thai Capital Market Organisations (Fetco) said its Investor Confidence Index retreated to the bearish zone for the first time in eight months in May on post-election political uncertainties and economic slowdown.
• Inflation in May slowed to a 21-month low of 0.5% year-on-year, backed by drops in oil prices, electricity bills and food prices. The Ministry of Commerce expects no change in June.
• The Ministry of Finance plans to review the collection of the new land tax in the next year. Bangkok could gain as much as 15 billion baht in revenue thanks to an adjustment every four years and rising numbers of taxpayers.
• The Ministry of Commerce has extended the exemption from anti-dumping duty on steel for food cans from China, South Korea, Taiwan and the EU until Nov 23. The aim is to keep manufacturing costs down.
• TPI Polene Power Plc (TPIPP), Thailand's largest waste-to-energy project developer and operator by capacity, will continue to allocate its five-year capital spending of 14 billion baht to replace its coal usage with renewable energy and boost its power generation capacity.

COMING UP: On Monday, China will release May car sales. On Tuesday, the UK will report April unemployment, Germany will update the economic confidence index and the US will release May inflation. The Fed will announce its rate decision on Wednesday (2am Thursday Thailand time). On Thursday, Japan releases May trade figures, while China will report May industrial production, retail sales and unemployment. As well, the European Central Bank will meet and the US will release May retail sales.

• Locally, the Fiscal Policy Office will report updates economic figures and the economic outlook next week.

STOCKS TO WATCH: InnovestX Securities recommends selective buys, including stocks expected to see minimal impact from the new coalition's policies, among them BBL, KTB, KBANK, HMPRO, GLOBAL, BCH, CHG, SPRC, STANLY, AH, ONEE, HTC and TNP. The brokerage has also upgraded its ratings or raised target prices for KKP, BJC and OSP.

• InnovestX also cautions about stocks for which prices have already moved above pre-Covid levels and are seen as underperforming: AAV, SAWAD, MST and NRF.
• Krungsri Capital Securities recommends stocks that will benefit from China's economic recovery, among them SCGP, IVL, PTTGC, PSL, DOHOME and GLOBAL.

TECHNICAL VIEW: InnovestX Securities sees support at 1,540 points and resistance at 1,580. Krungsri Capital Securities sees support at 1,545 and resistance at 1,576.