Analysts Recommend Buying BBL-KBANK-SCB after Fed Hikes Rate by Another 75bps

Analysts recommend “BUY” on large banks after the US Fed raised policy rates by 75 basis points to 3-3.25% at its latest FOMC meeting, which was in line with market expectations.

The US Federal Reserve on Wednesday raised its benchmark interest rates by another 75bps and signaled that the central bank will keep raising rates well above the current level to bring down 40-year high inflation.

Fed’s Chairman Jerome Powell said that his main message has not changed since Jackson Hole, and that is the central bank is strongly resolved to bring inflation down to 2%, and will keep at it until the job is done.

The Fed is projected to hike the rate at the next two meetings, 0.75% in November and 0.50% in December, to 4.50% at end-2022. 

CGS-CIMB Securities, in a note, recommends investors to “BUY” shares of major Thai banks such as Bangkok Bank (SET: BBL), Kasikorn Bank (SET: KBANK), and Siam Commercial Bank (SET: SCB), all of which have benefited from Fed rate raised.

Thailand’s current interest rate of 0.75% is quite low. The aggressive interest rate hikes by the Fed have put pressure on the MPC to follow suit. In light of the upcoming MPC meeting on September 28, it is possible that the Thai central bank would increase the policy rate by 0.25%, bringing it to 1.00%.

The Bank of Thailand raised its key interest rate by a quarter point for the first time in nearly four years to 0.75% last month, citing that a lift in benchmark rate is necessary to fight surging inflation as the Thai economic recovery gains momentum from increasing tourist arrivals.

CGS-CIMB has set a target price of THB174 per share for BBL, THB197 for KBANK, and THB145 for SCB.