Kaohoon Morning Brief – 17 August 2022

1) FSS expects SET Index to break 1,630 resistance level, supported by foreign flows

Finansia Syrus Securities (FSS) expected the SET to move sideways-to-sideways up. It is more likely to cross its resistance at 1,630 points (+/-), supported by international fund inflows. They extended their sizable inflows into the market to bet on the rising economic outlook in Thailand. However, wethink  the SET’s short-term upside is narrow. Besides, it may retreat after its swift rallies in the past month.

Tonight, investors should monitor FOMC meeting minutes to understand their views on inflation and interest rate hikes. FSS believed the pressure from Thailand’s headline inflation would peak in July-August before slowing down after crude prices decrease. However, core inflation is climbing due to production costs. Strategically, FSS still prefered domestic and reopening plays, in line with the economy, which would return to its pre-covid level in 4Q22-2023. In the short run, FSS focused on laggards since the SET’s upside is more limited compared to its target of 1,670 points. FSS viewed that strength would provide an opportunity to sell some to make a profit at this time to repurchase them on weakness after international fund inflows began to slow. Also, they went short to close their substantial net long bets on the Index Futures.


2) AUD surges after central bank hikes rate by 50 basis points

The New Zealand’s central bank on Wednesday raised interest rates by 50 basis points to 3.0% from 2.50%, marking its seventh-straight rate hike in a move to slow down inflation.

The increase was in line with estimations by all 23 economists in a Reuters Poll that the Reserve Bank of New Zealand would decide to hike its policy rate by 50 bps.

The New Zealand dollar edged higher on Wednesday after the announcement of the hawkish move by the central bank, gaining 0.58% to $0.6377.


3) US factory output growth beats expectations in July

Manufacturing output in the U.S. climbed more than expected in July, with production rising at auto plants and elsewhere, suggesting underlying resilience in the industry despite weakening business confidence.

The Federal Reserve said on Tuesday that manufacturing production increased by 0.7% in July after falling by 0.4% in June. Manufacturing output was expected to increase by 0.2 percent, according to Reuters’ poll of economists. Production went up by 3.2% when compared to July of 2021.