Kaohoon Morning Brief – 18 November 2022

1) FSS expects downturn is an opportunity to accumulate, eyeing 4Q22-23 recovery

Finansia Syrus Securities (FSS) expected the SET to move sideways-to-sideways-down to its support at 1,600-1,610 points. On the international front, the market sees pressure after the Saint Louis Fed president indicated that the policy rate should at least climb to 5-5.25%. As a result, the Dollar Index and U.S. bond yields resumed their rallies. Also, the inverted yield curve in the U.S. remained wide at -68 bps vs. -44 bps at the end of 3Q22. It reflected concern over higher recession risk in the U.S.

On the domestic front, MORE and the SEC’s order for temporary business suspension of a securities company due to fraud should affect confidence. Although the market should retreat in the short run, FSS maintained its mid-to-long-term bullish view, in line with the accelerating economy.

Also, listed companies should report continued profit recovery in 4Q22-2023. Hence, FSS viewed retreats as an opportunity to accumulate. The SET’s mid-to-long-term support is at 1,580 points (+/-).


2) Fed’s Bullard expects policy rate at 5-7% range

St. Louis Fed President James Bullard suggested the proper zone for the fed funds rate could be in the 5%-7% range, based on Taylor Rule. The range was higher than current market pricing.

According to Bullard the policy rate is not yet in a zone that may be considered sufficiently restrictive and to attain a sufficiently restrictive level, the Fed fund rates will need to be increased further.


3) Inflation in Japan exceeds forecasts to reach a 40-year high in October

Inflation in Japan hit its fastest pace in 40 years in October, putting the central bank in a difficult position as it seeks to explain the need to maintain monetary stimulus.

The core consumer price index in Japan grew 3.6% year on year in October, above estimates for a 3.5% increase and marking the fastest rate since February 1982. According to the internal affairs ministry, the acceleration is being driven by processed food and the fading impact of mobile phone fee reduction.

Without including the cost of fresh food, but including the cost of fuel, the index shows a 3.0% increase in October compared to the same month a year ago.

The latest figures show that the country’s inflation rate has risen above the Bank of Japan’s target of 2% for the seventh consecutive month.