Kaohoon Morning Brief – 27 July 2022

1) FSS recommends ‘value plays’ as the market looks forward to Fed’s decision

Finansia Syrus Securities (FSS) expected the SET to move sideways within 1,545-1,560 points. The market is still in its wait-and-see mode during long holidays. Also, it keeps a close watch on the Fed, which meets on July 26-27. At the meeting, the consensus expects the FOMC to hike its policy rate by 0.75% at a probability of 77%.

Other than that, the 2Q22 GDP of the U.S. and the eurozone are also crucial. Adding to today’s pressure are the IMF’s cuts in its global economic forecast to +3.2% in 2022 and +2.9% in 2023 due to the war impacts and China’s economic slowdown. The U.S. consumer confidence index extended its loss in July, the third straight month, while the stubborn inverted yield curve reflected concerns over the 2023 economic outlook.

However, FSS maintained that the Thai equity market would outperform its global peers due to support from its economic uptrend. In this regard, domestic plays should perform well, particularly in 2H22. Since the BoT signaled gradual rate increases and expected the Baht to rise in 4Q22 after tourism enters its high season, they should support mid-to-long-term fund inflows. FSS still focused on investing in value plays with less demanding valuation than their pre-covid period. Besides, stocks with a healthy 2Q22 profit outlook should outperform the market


2) IMF slashes global growth in 2022 to 3.2%

The International Monetary Fund cut global growth in 2022 to 3.2%, 0.4 percentage points down from its earlier forecast of 3.6% expansion, citing that downside risks from high inflation and the war between Russia and Ukraine were materializing and could push the world economy to the brink of recession if left unchecked.

The fund cut its 2023 growth forecast to 2.9% from the April estimate of 3.6%.

IMF also reiterated its earlier forecast for the U.S. economy of 2.3% in 2022 and 1.0% in 2023. For China, IMF cuts growth forecast in 2022 to 3.3% from 4.4%.


3) JPMorgan expects interest rate hikes from the Thai central bank this year, but banks will be selective in passing it to borrowers.

The firm noted that BBL remains as its preferred pick in the near term among large banks, and TTB and SAWAD among smaller names.

Meanwhile, KBANK and SCB should move in line with the broader banking sector, while KTB and TISCO remain funding sources in the sector.


4) Bill to subsidize US chipmakers now on pace for final approval

The bill to subsidize U.S. chip producers has been cleared by key Senate and will be submitted to the chamber for final approval.

Last week, U.S. Senate voted to move ahead with a new version of legislation to provide billions of dollars in subsidies and tax credits for the semiconductor industry in an attempt to ease a supply shortage that has disrupted the market from automobiles to electronics as well as high-tech weapons.