Kaohoon Morning Brief – 6 September 2022

1) FSS expects energy sector to support SET Index, but global outlook still lacks positive drivers

Finansia Syrus Securities (FSS) expected the SET to move sideways to build its base within 1,610-1,630 points. Energy should support the market, in line with the crude price hikes after OPEC+ resolved to trim its monthly output for October. However, the market still lacks fresh catalysts. Yesterday, Thailand’s reported inflations for August were in line with the headline at +7.86% Y-Y and the core at +3.15%. Since they extended their strength from last month, the MPC would likely raise its policy rate by another 0.25% at the meeting late this month. This week, the spotlight is still on the ECB meeting. The market expects it to raise its benchmark rate by another 0.5% to 1% amid the economic slowdown and high energy price crisis. Such factors continue pressuring the market and limit risk assets’ gains, particularly global plays. FSS viewed that the SET would outperform, in line with the rising economic outlook and tourist arrivals in 4Q22. In this regard, FSS recommended to focus on domestic and reopening plays with historically lower valuations than their pre-covid level. If the index decreases to 1,580-1,600 points (+/-), it will provide an opportunity to repurchase stocks.


2) Liz Truss becomes leader of Conservative Party and Britain’s next prime minister

Foreign Secretary Liz Truss won the leadership election for the ruling Conservative party on Monday, making her Britain’s next prime minister. She has pledged to keep her campaign of tax cuts and to address the country’s worsening energy crisis.

Truss won the vote by defeating Rishi Sunak, the country’s former finance minister. Over the past three weeks, members of the Conservative Party were polled on who they would support for leadership. Of those members, 81,326 voted for Truss and 60,399 voted for Sunak.

Turnout was 82.6% and, roughly, Truss took around 57% of the vote while Sunak achieved 42% of the vote.

Truss will become the Conservatives’ fourth prime minister since a 2015 election in Britain. She will immediately face one of the most difficult tasks in easing the energy crisis and sky-rocketing inflation that hit a fresh 40-year high in July at 10.1%.


3) OPEC surprises market with 100,000bpd cut for October

OPEC+ decided on Monday to reduce production targets by around 100,000 barrels per day beginning in October, shocking the energy markets in the midst of significant turbulence.

Energy experts had anticipated that the group would maintain its current output policy.

It was just last month that OPEC and allies reached an agreement to increase oil production by an additional 100,000 barrels per day. Many people saw the tiny increase as a snub when the United States President Joe Biden returned from a trip to Saudi Arabia, where he pressed the OPEC leader to increase production in order to lower oil costs and stimulate global economic growth.

In a statement released on Monday, OPEC+ explained that the production cutback was because the upward adjustment was “intended only for the month of September.”

The next OPEC+ meeting is scheduled for Oct. 5.


4) India says it will carefully consider about putting price cap on Russian oil

India stated that it will carefully consider putting a price cap on Russian oil. The report came after the G-7 nations urged two of the world’s biggest oil consumers China and India to cap Russian oil prices as part of their sanction against Moscos’ action in Ukraine.

India is still maintaining its position on not putting sanctions on Russia. Both India and China import more energy from Russia at a discount since the war with Ukraine started.