Kaohoon Morning Brief – 13 January 2023

1) FSS expects SET Index to test 1,695-1,700 on positive sentiment from Wall Street

Finansia Syrus Securities (FSS) expected Thailand’s SET Index to test its previous high at 1,695-1,700 points, boosted by slowing down U.S. inflation data, resulting in a continuous decline in the Dollar Index and bond yields, which is positive to risk assets.

The market expected U.S. Fed to hike interest rates by 25 basis points in February and March, putting Fed fund terminal rate to 4.75-5%, which is lower than the dot plot of 5-5.25%.

FSS maintained its positive view on growth and tech stocks which are lagging the market recently. The firm also preferred domestic and reopening play for mid and long-term plays, seeing correction as an opportunity to accumulate.


2) Markets fully expect 25bps rate hikes as inflation data for December inline with estimates

The U.S. Consumer Price Index for December came in at 6.5% from a year ago, in line with expectations by economists. On a monthly basis, consumer prices fell 0.1%, the largest month-over-month decrease since April 2020.

In the meantime, the Core Consumer Price Index, which excludes the volatile oil and food prices, was also in line with expectations for an increase of 5.7% from a year ago after gaining 6.0% in November. Core inflation rose 0.3% last month after rising 0.2% in November.

After the announcement of December inflation, the forecast for Fed fund futures is now fully expecting a 25 basis points interest rate hike by the U.S. central bank on February 1st.


3) Oil prices increase on positive demand outlook

Oil prices rose around $1 per barrel on Thursday after the announcement of U.S. inflation slowing down to 6.5% in December, while the market also had optimism over China’s returning demand after the reopening.
The international benchmark Brent crude finished the day with a gain of $1.36 or 1.7% at $84.03 a barrel. The West Texas Intermediate rose $0.98 or 1.3% to close the day at $78.39 per barrel.

Meanwhile, the plummet in U.S. dollar against the euro to the level of nearly 9-month low also helped boost oil prices.