Kaohoon Morning Brief – 31 August 2022

1) FSS expects energy sector to drag the market down after 6% plummet last night

Finansia Syrus Securities (FSS) expected the SET Index to retreat to 1,630 points (+/-), dragged by energy after crude prices tumbled by 6% due to concerns over inflation, which weighed down the economy. Also, Iraq was ready to export more crude oil to Europe. Generally, the market has pressure from U.S. equity markets’ extended retreats due to the Fed’s persistently sharp rate hikes. Investors should monitor U.S. non-farm payrolls for August late this week and its CPI, which will be out on September 13. They are crucial indicators before the Fed’s next meeting in the week after that. However, FSS believed that the SET’s retreats would be less than its peers in other regions as it continues benefiting from international fund inflows due to Thailand’s economic uptrend after its full reopening. Domestic and value stocks with historically lower PER would outperform due to gradually decreased liquidity, in line with the global tightening. FSS recommended that its investors wait to accumulate more bets on weakness to 1,600 points (+/-) as FSS maintained its bullish view of the SET outlook in 4Q22-2023.


2) Danske Bank says ECB will hike rate by 75bps and will face recession

Danske Bank says the European Central Bank will raise the policy rate by 75 basis points next week as inflation is hovering near double digits.

The Danish bank stated that it believed the euro area will face a recession and the ECB will hike into that.

The bank added that it also acknowledged that even without the ECB tightening, the economy in Europe was in a severe situation to begin with as the energy crisis was worsening.

Meanwhile, ECB policymakers are calling for swift rate hikes to fight soaring inflation as the choice is pointing to either 50 or 75bps hike.


3) Spain’s inflation drops to 10.4% in August

Spain’s inflation rose 10.4% YoY in August, but slowed down from 10.8% in the previous month and also below the 10.9% forecast by Reuters poll.

Core inflation, which excludes energy and food prices, was at 6.4% YoY, increased from 6.1% in July, according to the preliminary data from the National Statistics Institute (INE).

Though slowing down, inflation still remained in double digit as surging energy prices continued to put pressure on the country.


4) China’s factory activity contracts for second straight month

China’s official manufacturing Purchasing Managers’ Index came in at 49.4 for August, indicating the second-straight contraction for the world’s second-largest economy, though better than the reading of 49.2 expected by analysts and 49.0 reading in July.

Meanwhile, the non-manufacturing PMI came in at 52.6 for August, lower than 53.8 in July.