Kaohoon Morning Brief – 22 November 2022

1) FSS sees short-term market retreat, but still bullish in mid-to-long term

Finansia Syrus Securities (FSS) expected the SET Index to extend its sideways movement within 1,610-1,630 since the market still lacks fresh catalysts. On the international front, markets are waiting for minutes of the Fed meeting and the comment from the Fed officials, most of which are looking at a slower rate hike. In China, the concerns over covid-19 increased after a reported death, the first since May. It sustained the market’s concern that China might reopen later than expected. However, the Thai equity market should outperform its peers due to its robust economy. The 3Q22 GDP slightly beat estimates, which helped create confidence over the 4Q22-2023 outlook. On fund flows, they streamed out modestly from risk assets into cash again, as witnessed by the continued Dollar Index recovery. As U.S. bond yields increased, the 10-2 treasury yield spread widened to -71 bps, implying a higher recession risk next year.

FSS believed the market is still in its short-term retreat to build its base but maintain its mid-to-long-term bullish view, in line with the accelerating economic outlook, with solid mid-to-long-term support at 1,580 (+/-).


2) Fed president needs more progress on inflation before slowing down rate hike

Cleveland Federal Reserve President Loretta Mester said Monday that Inflation will need to show more progress on downward trends to the 2% target before the Fed can stop the rate hike.

“We’re going to have more work to do, because we need to see inflation really on a sustainable downward path back to 2%,” Fed’s Mester said.

The market is widely expecting the Fed to deliver its seventh rate hikes this year in the December meeting, but at a smaller amount of 50 basis points instead of 75 in previous decisions.


3) Saudi Arabia denies rumors of increasing production by 500,000 bpd

Oil prices recovered slightly after Saudi Arabia denied a media report that it was discussing an increase in oil production with OPEC and its allies in a December meeting.

Earlier, Wall Street Journal reported that Saudi Arabia aims for an increase of up to 500,000 barrels on the discussion table.

Both Brent crude and West Texas Intermediate plunged by more than $5 in the previous session before bouncing back in early session of Asian trading hours on Tuesday.