Kaohoon Morning Brief – 4 August 2022

1) FSS expects SET Index to test 1,600 level as market easing tension from Pelosi visiting Taiwan

Finansia Syrus Securities (FSS) expected the SET to move sideways up to 1,600 points (+/-) as the sentiment eases after Pelosi’s visit to Taiwan did not trigger a U.S. – China military stand-off. OPEC+ resolved to raise their production by just 100,000 barrels/day in September, much lower than 648,000 in July – August. However, the U.S. oil stockpiles increased more than expected.

As a result, crude prices tumbled by 4%, with WTI hitting US$90.66/barrel. Although it would pressure upstream oil plays and coal today, it would be a blessing for power, packaging, building materials, logistics, and the broad market due to decreased inflation concerns. Currently, investors give a 68.5% probability that the Fed will hike its policy rate by 0.5% at the meeting on September 20-21 and a 63.3% possibility for a 0.25% rate increase during November 1-2. Also, NBTC’s putting the TRUE-DTAC deal on hold, waiting for additional crucial data will overhang ICT further. As more and more results are out, domestic plays should perform well. 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) Europe is facing more energy crisis over weather issues

Europe is facing more energy crisis as Electricite de France (EDF) said it is likely to extend cuts to nuclear generation as rising weather pushes up river temperatures. Europe’s biggest producer of atomic energy is now becoming an importer instead of exporter.

Germany is reportedly burning more gas to keep the lights on instead of preserving the fuel in storage for this winter.

German 1-year ahead power price hit record high at €400/mWh after Uniper said it may need to curb output at a German coal plant due to low Rhine River water levels.


3) OPEC+ increases output by 100,000 barrels per day

OPEC+ agreed to raise production output by 100,000 barrels per day, which is equivalent to 0.1% of global demand. The increase was so small that analysts said it was a setback to U.S. President Joe Biden after his trip to Saudi Arabia to ask Riyadh to increase output.