Kaohoon Morning Brief – 16 December 2022

1) FSS expects SET Index to experience short-term bearish sentiment in concerns of economic outlook

Finansia Syrus Securities (FSS) expected the SET Index to move sideways down, in line with the bearish global sentiment. In the short run, the index’s crucial support remains at 1,610 points as the market faces pressure from concerns over the global economic outlook in 2023. It risks a recession after data, including U.S. and Chinese retail sales and manufacturing production for November, missed estimates. They reflected the high inflation in the past year, which started affecting the economy. As a result, more funds fled equity markets to the U.S. dollar. Also, they streamed into bonds. FSS observed it from U.S. bond yields, which did not increase in line with the Dollar Index as happened earlier. It implies that the market paid less attention to the policy rate hikes and turned to focus more on the economic landscape. As expected, BoE and ECB raised their benchmark rates by another 0.5% yesterday. Also, the increase may continue to intercept inflation, which remains high at roughly 10%.

FSS maintained that the Asian economic outlook, particularly ASEAN, would remain healthy and has lower risks than the West. The recoveries in domestic consumption and tourism would drive Thailand. Also, the country should benefit from China’s easing restrictions and the planned general election early next year. They should offset exports, which risk a slowdown due to the global economy. FSS focused on investing in domestic and consumption plays.


2) ECB and BoE raise rates by 50bps to bring inflation down to target

The European Central Bank and Bank of England raised interest rates by 50 basis points on Thursday as it seeks to slow inflation and expects more to come next year.

The European Central Bank raised interest rates by 50 basis points, bringing its benchmark to 2.5%, which is the highest level since the 2008 financial crisis.

The ECB’s Christine Lagarde said that despite progress in recent months, she still thinks high interest rates would hang in there for a while.

The Bank of England also raised its key interest rate by another 50 basis points to 3.5% from 3%, its ninth time in a row as it looks to slow down 41-year high inflation rates.


3) US retail sales shows weaker-than-expected data in November, falling most in 11 months

US retail sales fell in November by the most in nearly a year, suggesting that inflation is weighing on consumers and raising concerns that the Fed’s rate hikes are driving the economy into a recession.

According to Commerce Department figures released on Thursday, the value of overall retail purchases fell 0.6% last month after climbing 1.3% in October. Excluding gas and autos, retail sales were down 0.2%. The values have not been adjusted for inflation.

A Bloomberg survey of economists predicted a 0.2% drop in overall retail sales.

The report found that nine out of thirteen types of retailers had a decrease in sales last month. Vehicle sales fell as well, owing in part to lower used car and truck prices. The value of petrol station sales declined 0.1% as pump prices fell.

Restaurant and bar sales rose 0.9% in November, marking the fourth consecutive gain in the report.