Kaohoon Morning Brief – 1 November 2022

1) FSS expects 75bps rate hike from Fed in Nov before slowing down moving forward

Finansia Syrus Securities (FSS) expected the SET Index to move sideways in a range of 1,600-1,620 as there is no fresh news in the market. Investors are still waiting for the Fed’s decision during November 2-3. FSS expected the Fed will hike their policy rates by 75 basis points on Wednesday and slow the pace of rate hikes in the next meeting onwards. Also, all eyes on Powell’s post-FOMC statement will be in focus.

On the economic front, Eurozone’s 3Q22 GDP saw slow growth at +0.2% Q-Q, +2.1% Y-Y while inflation hit 10.7% Y-Y in October. Hong Kong’s economy records the worst contraction -2.6% Q-Q, -4.5% Y-Y. For internal factors, investors still pay attention to 3Q22 earnings season this week onwards. FSS stated that it still preferred domestic and reopening plays and believed they will continue to outperform global plays.


2) Dow Jones has best monthly performance in October since 1976

The Dow Jones Industrial Average had the best monthly performance since January 1976, reporting a 14% gain in October despite falling 0.4% on Monday.

However, the Dow is still 10% lower this year, while S&P 500 dropped around 20% this year and Nasdaq by 30%.


3) Probability for 75bps Fed’s rate hike in December rises again, MS expects Fed’s pivot soon

The probability for a 75 basis point rate hike for December by the U.S. Federal Reserve rose again to 40% prior to the November meeting that a 75bps rate hike is 100% priced in.

However, Morgan Stanley stated that it expected the Fed’s pivot is getting closer.

The firm said that S&P 500 and Nasdaq 100 still ended the week up 4% and 2%, respectively despite weak 3Q earnings hammered some of the biggest tech stocks.

“We think this jibes with our thesis that the index will hold up until NTM EPS estimates come down more meaningfully,” Morgan Stanley wrote in a note. “This kind of price action isn’t unusual toward the end of the cycle particularly as the Fed moves closer to the end of its tightening campaign”.