SET to Test 1,540 Support as Global Recession Fears Mount

The SET Index is anticipated to fall further to test the 1,540-point support level over global recession fears following reports that several central banks may hike interest rates to curb inflation.

As of 10:26 local time in Thailand, the SET Index stood at 1,553 points, down 7.47 points or 0.48% from yesterday’s trading, with a total transaction value of THB25 billion.

Krungsri Securities expects the SET Index to head further south today and test 1,550 / 1,540 support amid global recession jitters after reports several central banks might raise rates to curb inflation. There could be pressure on oil plays after the Thai government requested refineries to contribute part of windfall profits to the state’s Oil Fund (estimate THB6-7 billion/month) and for gas separation plants to contribute 50% of excess profits.

For investment strategy, KSS recommends Defensive plays, such as BDMS, BH, INTUCH and BEM.

Asia Plus Securities said that the interest rate gap between Thailand and the United States is widening, following the US Federal Reserve’s decision to increase the key rate by 0.75% to 1.50-1.75%, while Thailand’s interest rate remains low at 0.5%, resulting in fund outflow from Thai stock markets. If the U.S. interest rate is increased to 3.25-3.50% by the end of 2022 and the Thai interest rate remains stable, the difference between the two rates will grow to 2.75-3%.

ASPS, hence, recommends OSP, CPF, and MAJOR. OSP has good immunity to inflation and benefits from lower commodity prices. CPF is laggard among food stocks and benefits from weak THB. MAJOR’s traffic is expected to rebound as cinemas are fully reopened (all seats available); plus, Jurassic World already earned more than THB100 million.

FSS International Investment Advisory (FSSIA) believes that tourist, health, banking, and energy sectors will gain from a rising interest rate, and has selected seven top stocks: BANPU, ESSO, GUNKUL, KTB, BCH, KKP, and BDMS.