Kaohoon Morning Brief – 3 August 2022

1) FSS expects markets to be pressured by China-US tension in sideways-down trends

Finansia Syrus Securities (FSS) expected the SET Index to move sideways down within 1,575-1,590 points due to the increased U.S.-China tensions after Nancy Pelosi visited Taiwan and prepared to meet the Taiwanese President today. She is the highest-ranking American politician to visit Taiwan in 25 years. While the trip angered China, investors are more anxious about a higher U.S. and China economic slowdown should political instability escalate. Today, OPEC+ will meet. The market does not expect them to raise their outputs more than planned.

FSS still believed that crude prices had seen this year’s peak in June, and global inflation should begin slowing down from September onwards. The SET’s short-run upside remains capped at 1,600 points due to the global economic slowdown and the slow recovery in Thailand. However, domestic plays should perform well, particularly in 2H22. It should support mid-to-long-term fund inflows. FSS still focused on investing in value plays with less demanding valuations than their pre-covid level. Also, stocks with a healthy 2Q22 profit outlook should outperform the market.


2) St. Louis Fed President James Bullard believes in softlanding amid increasing rate hikes

St. Louis Federal Reserve President James Bullard said that he still believes the U.S. economy can avoid a recession, even with an expectation that the central bank will need to keep increasing interest rates to tame inflation that is running at a 40-year-high pace.

Bullard expected the Fed fund rate to end the year at the range of 3.75%-4%.

“I think that inflation has come in hotter than what I would have expected during the second quarter,” he said during a speech in New York. “Now that that has happened, I think we’re going to have to go a little bit higher than what I said before.”


3) China makes several acts in protest against US paying a visit to Taiwan

After an ‘unscheduled’ visit by the U.S. House of Representatives Speaker Nancy Pelosi in Taiwan last night despite warnings from China to not meddle with its internal affairs, the Chinese military PLA announced that it will conduct important military exercises and training activities including live-fire drills in six regions surrounding Taiwan from August 4-7.

Meanwhile, China’s General Administration of Customs halted imports of some citrus fruits and frozen fish from Taiwan.

China also summoned US Ambassador to China Nicholas Burns overnight to protest against Washington’s action.

More importantly, Chinese battery giant CATL paused its multi-billion dollar US plant debut and expected to wait until the fourth quarter to make the announcement.

The U.S. House of Representatives Speaker Nancy Pelosi is expected to visit Taiwan’s parliament and meeting with President Tsai Ing-wen today.