Kaohoon Morning Brief – 16 August 2022

1) FSS expects energy sector should weigh the market down after crude prices tumble

Finansia Syrus Securities (FSS) expected the SET to move sideways within 1,615-1,630 points. Energy should weigh on the market after crude prices tumbled due to concerns over China’s economic slowdown while supply increased. However, international fund inflows into the Thai equity market should continue and support the index from the accelerating economy. In particular, tourism recovery would accelerate in 4Q22. Besides, the 2Q22 earnings results beat FSS’ estimate by 10%, led by energy, petrochemical, and hospitals, while commerce and contractors missed the estimate.

Generally, FSS still preferred domestic and reopening plays. They should benefit from the economic recovery in 2H22-2023 and return to their pre-covid level. However, the SET’s swift and continued rallies by nearly 7% from its low last month narrow its upside compared to FSS’ target of 1,670 points. Hence, FSS recommended short-term profit-taking, particularly when international fund flows slow or when foreign investors go short to close their sizable long positions on the Index Futures to repurchase them on weakness.


2) US housing in recession as homebuilder sentiment drops eight-straight month

Experts are now saying the U.S. is in a housing recession as the U.S. homebuilder sentiment declined for eight consecutive months, marking the worst stretch in the American history since the housing market collapsed in 2007 amid higher borrowing costs and elevated prices

The National Association of Home Builders/Wells Fargo Housing Market Index dropped 6 points to 49 in August. The index is below the breakeven level for the first time since May 2020.


3) China conducted fresh military drills after US delegates pay second visit to Taiwan

China conducted a second round of military drills in the waters and airspace around Taiwan on Monday after another group of US congressional delegation paid a visit to Taipei during the weekend.

Senior Colonel Shi Yi of the Eastern Theater Command said that the exercise was in response to political plays by the US and Taiwan that are undermining the peace and stability of the Taiwan Strait and the army will take all necessary measures to defend national sovereignty and the peace and stability of the Taiwan Strait.


4) Chinese yuan drops to 3-month low after weak economic data and key rate cuts

Chinese yuan dropped to three months low on Monday after the central bank cut two key interest rates in an effort to stimulate investment. The dollar was up around 0.45% against the onshore yuan of 6.773.

The decline also came after its weak economic data in July announced earlier.