Kaohoon Morning Brief – 26 July 2023

1) FSS says energy sector continues to outperform the market

Finansia Syrus Securities (FSS) expected Thailand’s SET Index to continue moving in a sideways trend within the range of 1,520-1,540 points and advised investors to focus on the Fed’s meeting tonight as the market is fully expected a rate hike by another 25 basis points to 5.25-5.50%. Meanwhile, the energy sector continued to outperform the market, following a rise in oil prices. Domestic Plays are getting overhung by the concerns of the forming of new government after the parliament meeting on 27 July that should be the day to select a PM candidate has been postponed without a new schedule.


2) MF raises global growth forecast to 3%, but warns of challenges ahead

The International Monetary Fund (IMF) slightly raised its 2023 global growth estimates as US and UK prospects improved, but still warned of persistent challenges. 

IMF raised global growth estimate for 2023 by 0.2 percentage point from its earlier forecast in April to 3.0%. The U.S. growth this year is expected at 1.8% vs 1.6% in April. However, 2024 growth has been revised down slightly to 1.0% vs 1.1% in the earlier forecast. 

Outlook for China this year remains intact at 5.2% and 4.5% in 2024. Meanwhile, forecast for Eurozone has also been revised up by 0.1 percentage point to 0.9% in 2023 and 1.5% in 2024.

In the latest World Economic Outlook published on Tuesday, IMF stated that inflation is easing in most countries but remains high, with divergences across economies and inflation measures. Meanwhile, acute stress in the banking sector has receded, but credit availability is tight.


3) Fed will certainly raise interest rate to highest level since 2001

It is widely expected that the U.S. Federal Reserve will raise its policy rates in the meeting on Wednesday for the 11th increase since March, seeing inflation still hanging above the target level. 

If approved, the U.S. interest rate will be raised to the highest level since early 2001 at 5.25-5.50%. The market hopes that this would be the last time for the hawkish central bank’s move in this hike cycle.  

Policymakers still believe that the inflation level is too high, but raising interest rates continuously will end up hurting its economy that many see as going into a mild recession.