Kaohoon Morning Brief – 21 September 2022

1) FSS remains bearish after risk assets saw selling again before the Fed meeting

Finansia Syrus Securities (FSS) stated that the SET should move sideways-to-sideways down within 1,630-1,640 points due to the investment sentiment. It remains bearish after risk assets saw selling again before the Fed meeting tonight. Since it is almost certain that the U.S. central bank will hike its policy rate by another 0.75%, their new economic forecasts and the dot plot, particularly for 2023, are more crucial.

According to the latest data, U.S. bond yields remained high. Also, the Dollar Index was still on its upward path. They extend pressure on risk assets and signal a recession next year. In Thailand, the equity market should move sideways to build its base after sharp rallies in the past two months.

FSS maintained its bullish view of Thailand’s rising economic outlook. It would support the SET to outperform its global peers. Also, it has a positive sentiment from the tourism industry’s high season in 4Q22. It should drive domestic and reopening plays to outperform. FSS still expected mid-to-long-term fund inflows and saw entry points for additional bets at 1,600-1,610 points (+/-).


2) Fed’s forward guidance is now more important than 75bps hike in September

The U.S. Federal Reserve is expected to raise interest rates by 75 basis points on Wednesday, but the forward guidance is now more important to investors than what was already priced-in.

The US central bank will release quarterly forecasts for inflation, the economy, and the future path of interest rates on Wednesday.

Investors are trying to gauge how much further the Fed would go with its hawkish stance before starting to pull back.

Fed funds futures on Monday were pricing in a terminal rate of 4.5% by April next year, up from just around 4% before the inflation report that missed expectations on Tuesday last week.


3) Oil prices settle lower ahead of Fed’s meeting

Oil prices fell on Tuesday ahead of the Federal Reserve meeting that the market anticipated a three-quarter interest rate hike that could drive the US dollar even further.

The November settlement of the international benchmark Brent crude closed $1.77 or 1.9% lower at $90.23 per barrel, while the West Texas Intermediate (WTI) closed $1.25 or 1.49% lower at $84.45 a barrel.