The Thai market saw a sharp drop on Wednesday, following a downward trading trend among Asian bourses in response to hotter-than-expected inflation in the U.S.
As of 10.00 a.m. Thai time, the SET index lost 17.12 points, or 1.03%, to 1,643.97, with a trading value of THB5.89 billion.
The Labor Department announced Tuesday that the U.S. inflation data in August rose 8.3% year-on-year and 0.1% since last month. The figure came down from its peak of 9.1% in June and a 8.5% reading in July. Still, the data missed expectations from economists and analysts for a 8.1% rise in August.
Core inflation which excludes volatile oil and food prices rose 6.3% YoY from 5.9% in July and 6.1% expected. The figure rose 0.6% from the previous month, compared to 0.3% expected.
Finansia Syrus Securities (FSS) stated that it expected the SET Index to decrease to its support at 1,625-1,630 points (+/-) due to the risk-asset sell-off after U.S. inflation for August beat estimates and did not show signs of weakness to the Fed’s target of 2%. As a result, the Dollar Index quickly increased. Also, the market feared that the Fed would aggressively hike its policy rate. At this point, the consensus has given a 33% probability that the Fed will increase its benchmark rate by 1% next week. Also, they anticipated a higher rate hike at the meeting in November.
Although U.S. equity markets tumbled by 4-5%, FSS maintained that the SET would suffer a lesser loss due to lower inflationary pressure. Also, the economy will likely accelerate, breaking rank from the global economic slowdown. Domestic and defensive plays should outperform at this time. For mid-to-long-term investments, the accumulating points remain at 1,600- 1,610 (+/-).
Meanwhile, CGS-CIMB Securities predicted that big bank stocks and insurance firms would outperform during the volatile session, as they would benefit from the anticipated big rate hike.