Kaohoon Morning Brief – 8 August 2022

1) FSS expects 75bps Fed rate hike after high U.S. non-farm payroll announcement

Finansia Syrus Securities (FSS) expected the SET to move sideways within 1,600 points (+/-) after U.S. non-farm payrolls for July were high at 528,000. It makes the market believe that the Fed will hike its policy rate by another 0.75% at the meeting in September with a 68% probability. It weighs on tech and growth shares. However, the domestic market still has support after the Labor Minister said the government was considering raising the country’s minimum wage by 5-8% in August. It is a direct plus for domestic plays, particularly commerce, food, and finance. This week, investors should monitor the MPC meeting. FSS expected it to increase its benchmark rate by 0.25%.

Strategically, FSS still focused on stocks with a robust 2Q22 profit forecast and a consistently healthy outlook in 2H22. Also, the securities companies like value and domestic plays that benefit from the domestic economic recovery. However, the SET’s rally to above 1,600+ narrows its upside compared to the target of 1,670 points. Hence, we recommend short-term profit-taking into strength after placing more bets at 1,520 points (+/-) to repurchase them on weakness.


2) China extends military drill to a month-long operations in Bohai and Yellow seas

China has unexpectedly announced additional live-fire drills in the Bohai and Yellow seas for a whole month after the previous drill was scheduled to conclude on Sunday.

The military drill started after the visit of the U.S. House Speaker Nancy Pelosi in Taiwan last week.

China’s Defense Ministry did not announce the purpose of the expanded exercises.


3) China exports growth beat expectations in July with 18.0% increase

China’s exports growth beat expectations in July despite the ongoing Covid-19 resurgence in the country that forces authorities to put stringent restrictions on some areas.

Exports rose 18.0% in July compared to the same period last year, beating economists forecasts of 15.0%. On a monthly basis, the figure also rose from 17.9% in June.

However, some analysts expected that weakening global demand could start to slow shipment down in coming months.

In the meantime, imports rose 2.3% from a year earlier, compared with June’s 1% gain but still missing an estimate of a 3.7% rise.


4) Hong Kong reduces quarantine day as part of economic reopening strategy

Hong Kong has cut the quarantine date for inbound travellers in the hotel starting this Friday as part of its moves to ease Covid-19 restrictions in the city.

The quarantine date will be reduced from seven days in the hotel to three days in designated hotel, and travellers can choose to spend another four days in the hotel or at home, which would require them to submit negative tests everyday.

During this period people will be able to leave the place, but still cannot enter venues with a vaccine pass requirement.