Kaohoon Morning Brief – 8 September 2022

1) FSS recommends domestic and reopening plays with historically lower valuations than pre-covid level

Finansia Syrus Securities (FSS) expected the SET to move sideways-to-sideways-up to test its crucial resistance at 1,645-1,650 points. Energy should see pressure after crude prices tumbled by 4% due to concerns that Chinese demand may slow. However, other anti-commodity sectors and consumption plays would recover well due to future easing inflationary pressure. They made it possible for the Dollar Index and U.S. bond yields to decrease, which benefits risk assets in the short run. However, OPEC+’s potential future production cut would help limit crude price downside. Today, investors should monitor the ECB to see if it will increase its policy rate by 0.75% amid the economic slowdown and high energy price crisis, as expected, or not.

FSS still recommended investments in domestic and reopening plays with historically lower valuations than their pre-covid level. If the SET decreases, it will provide an opportunity for stock repurchase.


2) Oil prices plunge over 5% on recession and demand fears

Oil prices fell by more than 5% on Wednesday to their lowest level in seven months as fears of recession risks and lower demand pressured the price.

The international benchmark Brent crude fell $4.83 or 5.2% to close at $88 per barrel.

West Texas Intermediate (WTI) dropped $4.94 or 5.69% to close at $81.94 per barrel.

Yesterday, China reported its trade data in US dollar terms expanded at a slower rate in August as a number of cities in the mainland, especially in southwestern area, went into lockdown due to the resurgence of Covid-19.

Exports in August grew 7.1% YoY, a sharp cut from 18% growth in July and 13.5% expected by economists.

Meanwhile, imports grew 0.3% YoY, compared to 2.3% gains in July and a rise of 1.6%  expected by economists.


3) Truss’ plan to tackle energy bills could add $115 billion to borrowing

The new UK prime minister Liz Truss will finalize her plan to combat soaring energy bills, which could ease inflation that is running at 40-year high. However, the bill that will help her people could add more than 100 billion pounds ($115 billion) to the country’s borrowing.

Sterling fell to its lowest level against the U.S. dollar since 1985.


4) Fed will almost certainly go for 75bps hike in September

Investors are now almost certain that the U.S. Federal Reserve will enact its third consecutive 0.75 percentage point rate hike at the meeting scheduled to be held later this month.

The probability of a three-quarter point rate hike rose to 82% on Wednesday morning, according to the CME Group’s FedWatch tracker.