Kaohoon Morning Brief – 22 June 2022

1) KTBST expects SET Index to continue rebounding as investors watch Fed’s statement

KTBST Securities (KTBST) expected the Thai stock market to continue rebounding as investors are focusing on the Fed’s chair Jerome Powell’s statement to the Congress later tonight, which could guide the direction of the U.S. stock market.

KTBST also recommended investors to follow the meeting of the Consumer Protection Board today regarding hire purchase that could have an impact on SAWAD and MTC.

Thai exports data for May will be announced today as well as the European consumer confidence index.

Additionally, the analyst recommended investors to lower positions in commodities that edge higher as a result of inflation such as oil products and refinery.


2) Morgan Stanley expects a 20% drop in S&P 500 in case of recession in the U.S.

Morgan Stanley strategist Michael Wilson thinks that if the U.S. goes into a recession, the S&P 500 could fall for another 20%.

“We don’t think 3400 discounts a full-blown economic recession (i.e., an unemployment cycle). In our view, such an outcome would imply a much lower trough for the S&P 500 of ~2900,” he said.

The strategist stated that Morgan Stanley’s economists now put the chance of a recession for the U.S. economy over the next year at 35%, up from 20% previously.

Even if the economy is able to avoid a recession, Wilson still sees more downside for equities, expecting the S&P 500 to fall for another 7-10% from the closing of around 3,770 points on Tuesday.


3) Hong Kong blows billions to defend dollar peg

The Hong Kong Monetary Authority (HKMA) bought HK$11.249 billion ($1.43 billion) from the market to defend dollar peg after Hong Kong Dollar dropped to its weakest this morning since April 2018 against the greenback.

HKMA stated that the aggregate balance will decrease to about HK$241.9 billion on June 23 (from HK$338 billion in May before the interventions began again).


4) Japanese yen hit 24-year low amid strong U.S. bond yields

The Japanese yen reached a fresh 24-year low against the dollar on Wednesday amid rising U.S. bond yields as the central bank continued to maintain an ultra low interest rate at -0.1%.

The yen briefly hit JPY 136.71 per dollar in an early trading session on Wednesday, the lowest since October 1998.

The central bank vowed to defend its policy of yield curve control, which effectively caps the yield on the 10-year government bond at 0.25%.

The pace of the Bank of Japan buying has accelerated further as the monthly run-rate is now double the pace of buying at ‘peak Abenomics’ at around ¥20 trillion of government bonds.