Asian investors hold breath amid US debt drama

RECAP: Asian markets mostly rose on Friday but investors remained on edge heading into the weekend amid concern that US debt-ceiling negotiations could still break down.

Thai shares moved in a range of 1,491.12 and 1,542.91 points this week before closing on Friday at 1,530.84, up 1.05% from the previous week, in daily turnover averaging 44.21 billion baht.

Institutions were net buyers of 7.89 billion baht, followed by brokers at 453.43 million and retail investors at 268.93 million. Foreign investors were net sellers of 8.62 billion baht worth of shares.

NEWSMAKERS: Fitch Ratings warned that the US credit rating could be downgraded if political leaders cannot reach agreement to raise the debt ceiling by the deadline of June 1.

• The dollar was headed for a third straight weekly gain, as markets raised bets on higher-for-longer interest rates to curb sticky inflation and nervously awaited a resolution to debt ceiling talks.
• The St Louis and Minneapolis Federal Reserve presidents said this week that the US central bank needs to raise interest rate by another 50 basis points as inflation is unlikely to fall.
• The Japanese yen weakened beyond 140 per dollar for the first time since November as traders priced in another Federal Reserve interest-rate increase.
• The value of Japanese stocks has swelled by $400 billion so far this year, the biggest increase in any Asian market and roughly double the gains of Chinese equities. Foreigners were net buyers of Japanese stocks for seventh straight week.
• The US economy in the first quarter expanded by 1.3%, slightly better than the initial estimate of 1.1%.
• Hyundai Motor Group and LG Energy Solution plan to build a battery factory in the US to supply Hyundai's electric vehicles there, as they are keen to benefit from American subsidies. The South Korean businesses will invest 5.7 trillion won ($4.3 billion) in the joint venture in Georgia.
• China-based Lenovo Group, the world's largest PC maker by volume, said it cut about 5% of its global workforce during the first quarter amid a lingering slump in the PC business.
• China's government has ordered computer component manufacturers to stop using chips from US-based Micron Technology as the two countries continue to spar over technological security.
• Apple on Tuesday announced a multibillion-dollar deal with the chipmaker Broadcom to use chips made in the US. Broadcom will develop 5G radio frequency components with Apple that will be designed and built in several US facilities.
• The Japanese government is adding 23 items, including advanced semiconductor manufacturing equipment, to its list of regulated exports. The move follows similar restrictions by the US.
• Inflation-adjusted real wages in Japan fell by the most in eight years in fiscal 2022, government data showed, highlighting the pain of inflation eroding consumers' purchasing power.
• Eight parties led by Move Forward on Monday signed a 23-point memorandum of understanding outlining the policies of their proposed coalition government. Analysts say the details appear positive for commerce, tourism, banking and clean energy, but investors need to monitor the impact on power plants, the construction sector and cannabis-based products.
• Move Forward leader Pita Limjaroenrat assured the Federation of Thai Industries that the minimum wage of 450 baht promised by his party would not rise overnight from current levels of 328-354 baht. Increases would be gradual, he said, in line with what the economy could absorb, and there would be supporting measures to reduce the impact on employers.
• Fitch Ratings says the country's credit standing may decline if the formation of a government is delayed and if fulfilling election promises raises the public debt.
• The country's plastic, steel and aluminium industries could be heavily affected by a new EU carbon tax that takes effect on Oct 1, the Office of Industrial Economics warns. It says companies need to adapt and expand export markets.
• The State Railway of Thailand is expected to hand over the land for the high-speed train project connecting three airports by October, allowing for construction to start, the Eastern Economic Corridor Office says.
• Power bills are expected to decline in line with lower world prices for liquefied natural gas, according to PTT Plc. The energy ministry said the fuel tariff (Ft) rate for September-December could fall by 50 to 70 satang per unit as a result.
• The National Economic and Social Development Council (NESDC) warns that ballooning household debt will become a serious problem if employment and the economy decelerate. In the fourth quarter of 2022, household debt was 15.1 trillion baht, up 3.5% year-on-year and accounting for 86.9% of GDP.
• The Thai Bond Market Association reports that more than 10 billion baht in interest has not been paid on corporate bonds worth 110 billion baht.
• The Board of Investment (BoI) received applications for 397 projects in the first quarter, up 9% year-on-year, with value rising 77% to 186 billion baht.
• The Bank of Thailand said credit extension in the first quarter was slowed by rising interest rates and increased non-performing loan (NPLs), as well as concern over the high household debt. There were 600,000 overdue loans that needed support to avoid being classified as bad debt.

COMING UP: The US will report March house prices and May consumer confidence on Tuesday. China will release the May PMI on Wednesday and the US will release May payrolls on Thursday. Locally, the Bank of Thailand's Monetary Policy Committee will meet on Wednesday, with most analysts expecting another 25-basis-point rate increase.

STOCKS TO WATCH: Bualuang Securities (BLS) believes the SET has been declining mainly on concern about the economic policies of the Move Forward and Pheu Thai parties, particularly wage increases.

• BLS says an increase in the minimum wage to 450 baht would reduce SET-listed firms' profits by 2.1%. An increase to 400 baht would reduce the impact to about 1.3%.
• BLS says its stock picks in groups that continue to have a good outlook include AOT in transport; GULF in power; ADVANC in communication; WHA and AMATA in industrial estates; CPN, CRC and COM7 in the consumer sector; PLANB in media; KTC in finance; SCB in banking; and ERW and AWC in hotels.
• InnovestX Securities says investors should avoid power plants as well companies in the PTT group amid the risk of a change in energy policies and price structures under a Move Forward government.
• Stocks expected to be significantly affected by higher wages include property (LPN, SIRI, PSH and QH) and food firms (ZEN, CPF, GFPT and TU). Also be wary of shares that have moved above pre-Covid levels and appear poised to underperform, including KTC, ASP, MST, THRE, AAV and SAT. "Best of the Best" recommendations are AU, BBL, BDMS, CPALL and GULF.

Technical View: InnovestX Securities sees support at 1,523 points and resistance at 1,550. Krungsri Securities sees support at 1,500 and resistance at 1,545.