SET Index Falls Heavily as Rising US Inflation Fuels Fears on Steeper Fed Rate Hikes

Thai stocks are likely to fall further today as US May inflation rose to a fresh 40-year high at 8.6 percent, raising fears that the Federal Reserve may extend an aggressive series of interest-rate hikes as high as 0.75 percent in a meeting this week.


As of 10.13 hrs. local time in Thailand, the SET Index was at 1,614.36 points, dropping 18.26 points, or 1.12 percent, with a trading value of THB14 billion.


Analysts expect the SET Index to fall further today, but remain over the 1,600-point threshold, as investors have already rebalanced their stock portfolios and the downward trend will last just today, before rebounding somewhat on Tuesday and Wednesday ahead of the US Federal Reserve meeting.

However, analysts warned of a sell-off in five big-cap stocks that are favored among foreign investors, led by PTTEP, KBANK, ADVANC, PTT, and CPALL, as well as BDMS and BCH, due to inflationary pressure and Thai baht weakness.

PTTGC and SCC are also likely to face a sell-off, as the Energy authorities are considering capping the price of oil sold by Thai refineries in order to better control energy inflation.


The May consumer price index for the U.S. accelerated by 8.6 percent year over year and 1.0 percent from April, crashing hopes that the rise in cost of living had peaked in the previous month. Meanwhile, core inflation, which excludes food and energy prices, only eased to 6.0 percent from 6.2 percent.

The Labor Department said on Friday that the surge in prices was “broad-based, with the indexes for shelter, gasoline, and food being the largest contributors.”

Stocks in the U.S. made a sharp fall on Friday following a report of May inflation that came in at its highest level since 1981 and also beating economists’ forecasts by a large margin.


Last week, the Thai stock market closed in the red, falling 8.72 points or 0.53 percent to 1,632.62 points, with a trading value of 59 billion baht. According to the expert, the Thai stock market closed lower due to negative sentiment surrounding rising inflation and tighter monetary policy. In the meantime, the Bank of Thailand also signaled a faster-than-anticipated rate hike.