Sell-off continues as inflation fight stepped up

RECAP: Asian markets fell again yesterday and the dollar extended gains amid a global sell-off fuelled by growing recession fears as central banks around the world ramped up interest rates to fight decades-high inflation.

Despite the challenges, analysts think the Thai equity market will benefit from an improving economic outlook as the Covid threat recedes and tourism revives further. That should help support medium- to long-term fund inflows and reduce pressure on the baht.

The SET Index moved in a narrow range of 1,628.96 and 1,649.29 points this week before closing yesterday at 1,631.71, up 0.08% from the previous week, in daily turnover averaging 64.73 billion baht.

Foreign investors were net buyers of 1.73 billion baht, and retail investors bought 2.81 billion. Brokers were net sellers of 1.46 billion and institutions sold 1.52 billion baht worth of shares.

NEWSMAKERS: The US Federal Reserve has slashed its growth forecast for the world's largest economy to just 0.2% this year, from 1.7% forecast in June. It announced the revision after delivering its third consecutive 75-basis-point interest rate hike and warning it was far from finished. The key rate is now expected to reach 4.4% by year-end and 4.6% in 2023, the highest since 2007.

• The Bank of England raised its key interest rate to 2.25% from 1.75% on Thursday and said it would continue to "respond forcefully, as necessary" to inflation, despite the economy probably already being in a shallow recession. It expects inflation to peak near 11%.
• The Asian Development Bank revised down its growth forecast for developing Asian economies to 4.3% for 2022 from 5.2% estimated in April. It also cut its growth projection for 2023, slashing it to 4.9% from 5.3%.
• Indonesia's central bank increased interest rates by more than expected on Thursday as it sought to keep a lid on inflation. The Philippines, Vietnam and Taiwan also hiked their rates.
• The yen was heading for its first weekly gain in more than a month after Japanese authorities intervened in markets to support the currency for the first time since 1998. The intervention came after the Bank of Japan stuck with its negative-rate policy, which prompted a drop in the yen past 145 per dollar.
• The websites of Cathay Pacific Airways and its low-cost arm HK Express buckled under a rush of flight searches yesterday as the Hong Kong government announced that mandatory quarantine and other pandemic travel restrictions will be scrapped from Monday.
• Japan said on Thursday it would finally lift tough Covid restrictions on foreign tourists. Effective from Oct 11, it will remove numerical limits on daily arrivals and start allowing tourists to move freely throughout the country.
• Russia has called up more men for war in Ukraine, sparking a rush to exit the country by men who don't want to go. The partial mobilisation of 300,000 reservists announced by President Vladimir Putin is expected to raise geopolitical risk.
• The Thai government plans to borrow 2.23 trillion baht in the fiscal year starting Oct 1, about 3% less than its target this year, as the country rolls back Covid-related spending. The debt-raising will include 793.6 billion baht of fresh borrowing to cover the fiscal deficit and 1.44 trillion baht for refinancing.
• Domestic car sales surged 61.7% in August from a year earlier to 68,208 units, helped by an easing of Covid curbs and a low base last year, the Federation of Thai Industries said. In the first eight months, car sales rose 19.6% and are on track to meet the full-year target of 850,000 units.
• Calls are growing for the Bank of Thailand to do more to arrest the decline of the baht, which has slumped to 37.3 to the dollar, its weakest in 16 years.
• Domestic economists forecast that the central bank's Monetary Policy Committee (MPC) will raise its interest rate by another 25 basis points to 1% when it meets on Wednesday.
• The government on Oct 1 will lift the state of emergency imposed since the start of the pandemic, and dissolve the Centre for Covid-19 Situation Administration. Also on Oct 1, visitors to Thailand will no longer have to show a Covid vaccination or test certificate.
• Finansia Syrus Securities (FSS) forecasts the earnings recovery of Thai Union Frozen Plc (TU) will continue in the third quarter as it is the high season for seafood exports, while costs for tuna, aluminium and transport are falling. Normalised earnings are expected to rise 17% year-on-year.
• The value of Thailand's digital content industry is expected to reach 62.4 billion baht by 2024, up from 42 billion last year, driven by strong growth in the gaming sector and the recovery of the animation industry, says the Digital Economy Promotion Agency.
• Energy authorities are planning to make gasohol E20 the primary fuel at petrol stations in place of gasohol E10, also known as gasohol 91, which will be gradually phased out.
• Central Retail Corp (CRC), the country's leading mall operator, has set its sights on opening a total of 700-800 Tops Vita stores selling vitamins and food supplements, with total sales of 1.5 billion baht by 2027.
• Thai steel manufacturers are planning to increase domestic prices following a rise in operating costs, from raw material prices and electricity bills to the higher daily minimum wage. Power bills alone have risen by about 50%, they say.
• US-based Chevron Offshore (Thailand) and PTT Exploration and Production (PTTEP) are competing for new licences for offshore petroleum exploration and production in the Gulf of Thailand. The 24th round of auctions covers three offshore areas but does not include the Erawan and Bongkot gas blocks operated by PTTEP.
• The SET is promoting a new type of depositary receipt (DRx) for foreign underlying securities. The first two, to be issued by Krung Thai Bank, will allow local investors to acquire shares in Apple Inc and Tesla Inc. They will be available from Sept 29 through the SET Streaming application.
• HappyFresh has shut down operations in Malaysia and Thailand after struggling in those countries, leaving the embattled grocery delivery startup to focus on its main Indonesian market.
• PTT Plc continues to widen its food business by injecting money into Singapore-based startup, Nutrition Technologies (NT), which can produce protein from flies, in a move to fund its new production facilities in Thailand and Southeast Asia.

COMING UP: Investors this week will be assessing the results of Sunday's Italian election, expected to bring a hard-right, eurosceptic party to power. Economic data include the German business sentiment index on Monday, and US durable goods orders and new home sales on Tuesday.

• Domestically, August trade data will be released on Monday. The Bank of Thailand will hold a policy rate meeting on Sept 28, and the Constitutional Court on Sept 30 will rule on Gen Prayut Chan-o-cha's tenure as prime minister.

STOCKS TO WATCH: Thanachart Securities has a positive view on Thailand's tourism and consumption outlook. Stocks recommended include AOT, SPA, CENTEL, PTG, BA, BDMS, CPN, CRC, WHA, ADVANC, EA, NEX, BBL and KTB.

• Thanachart also believes that the Bank of Thailand will lift interest rates by at least 25 basis points this coming week, and that will benefit the banking sector. Its picks are BBL and KTB.
• Capital Nomura Securities notes that Japan is now preparing to open the country to individual tourists without quarantine, which will support Thai stocks such as AOT and AAV. Thailand is also ending most Covid controls and opening the country more for foreign tourists, benefiting hotel, retail and aviation businesses. Reopening stocks recommended are ERW, CENTEL, VRANDA, AOT, AAV, BA, BJC, MAKRO, ONEE and BEC.

TECHNICAL VIEW: Thanachart Securities sees support at 1,620 points and resistance at 1,650. Phillip Securities (Thailand) sees support at 1,625 and resistance at 1,650.