Kaohoon Morning Brief – 31 January 2023

1) FSS sees short-term profit taking prior to Fed’s meeting

Finansia Syrus Securities (FSS) expected Thailand’s SET Index to move sideways to sideways-down trend within the range of 1,670-1,685 points as the market lacked positive drivers. The market is widely expected the U.S. Fed to lower the size of its rate hike aggression to 25bps after a series of hikes in 2022, bringing the rate up to 4.50-4.75%. Meanwhile, the firm saw some short-term profit taking prior to the Fed’s meeting on January 31 – February 1.


2) IMF revises global growth in 2023 up to 2.9%

The International Monetary Fund (IMF) revised its global growth projections upward for this year as the outlook on the global economy turned more positive with a boost by better-than-expected domestic factors in several countries.

The IMF upgraded global economic projections for 2023 by 0.2 percentage points to 2.9%, but warned that elevated interest rates and disruption from Russia and Ukraine’s war would still weigh on growth.

The international fund also revised its projection for global growth in 2024 down to 3.1%.


3) Analysts are turning more cautious on risk assets amid January’s rally

Morgan Stanley’s Chief Strategist Mike Wilson said that he believed the recent price action was more a reflection of the seasonal January effect and short covering, while pointing out that investors seemed to have forgotten the cardinal rule of ‘Don’t Fight the Fed.’

Wilson noted that the Fed’s meeting this week that the market expected a 25 bps hike might serve as a reminder for the rule.

Meanwhile, Standard Chartered’s Global Head of Research also turned cautious of the risk rally, saying that the firm believed the jury is still out on this debate; but also believed that the decline in volatility measures and the narrowing of spreads may already overstate the improvement in risk factors.

With January’s rally the improvement in risk appetite has gone a little too far and too fast, thus, the firm turned a bit cautious and kept its risk lite.