Easing of Chinese Covid curbs lifts equity sentiment

RECAP: Asian shares were mixed yesterday as investors were heartened by the possible easing of Covid curbs in China, while they awaited job figures in the United States that could determine whether the Federal Reserve will start to moderate its interest-rate increases as widely expected.

Fund flows are expected to continue into Thailand as the pace of global interest rate hikes slows. The SET index is expected to test 1,670 points this month, analysts say. Energy stocks should recover, in line with rising crude oil prices as China eases Covid restrictions. As tourist arrivals have accelerated, stock market sentiment is positive and domestic plays are recommended.

The SET Index moved in a range of 1,612.76 and 1,651.76 points this week before closing yesterday at 1,641.63, up 1.28% from the previous week, in daily turnover averaging 58.28 billion baht.

Retail investors were net sellers of 9.41 billion baht, followed by brokers at 667.39 million. Foreign investors were net buyers of 9.66 billion baht and institutional investors sold a net 419.22 million baht worth of shares.

NEWSMAKERS: China will soon announce an easing of Covid quarantine rules in favour of home isolation for mild cases, and a reduction in mass testing, even as cases nationwide remain near record highs, Reuters reported yesterday. Some communities are already easing back in a marked shift after widespread protests.

• US Federal Reserve chairman Jerome Powell on Wednesday signalled smaller interest rate hikes in 2023 as inflation slows down. The Fed Watch Tool now suggests a 77% probability of a 50-basis-point hike at the Dec 13-14 meeting, and expects the rate to peak at 5.00% next year. Mr Powell cautioned, however, that the fight against inflation was far from over.
• Oil prices headed for their biggest weekly advance in almost two months as China took more steps to soften Covid controls, while the US said it would halt releases from its Strategic Petroleum Reserve, which it had been using to push down prices.
• Euro zone inflation in November moderated to 10% from 10.6% a month earlier, thanks to lower energy prices. The European Central Bank is now projected to raise its interest rate by 50 basis points next week, down from 75 bps expected earlier.
• Gold flirted with $1,800 an ounce and was poised for its best performance in three weeks as the US dollar declined to a three-month low on prospects of slower interest-rate hikes.
• The Japanese yen soared to a three-month high of 135 to the dollar as traders focused on comments by Fed chief Jerome Powell that US rate hikes could be scaled back "as soon as December".
• IMF managing director Kristalina Georgieva flagged rising inflationary pressure and China's economic slowdown as risks to Asia's economic outlook. But Asean economies are a "bright spot", with expected growth in the 10-country group of 5% this year, moderating slightly in 2023, she said.
• Major Japanese automakers' combined global output grew 14.4% to 2.11 million units in October from a year earlier as parts shortages prompted by the pandemic receded, data showed this week.
• Singapore acknowledged that its state investment arm had suffered "reputational damage" after a failed bet on FTX, formerly the world's second-largest cryptocurrency exchange. Finance Minister Lawrence Wong said Temasek had to take a US$275-million write-down after FTX collapsed last month.
• Bitcoin is being "artificially" propped up and should not be legitimised by regulators or financial companies as investing in it is more akin to gambling, the European Central Bank said on Wednesday, adding that cryptocurrency was "on the road to irrelevance".
• Bitfront, a US crypto exchange backed by the Asian social-media giant Line Corp, said it would shut down amid challenges in a "rapidly evolving" industry.
• The Bank of Thailand (BoT) raised its key interest rate by a quarter point to 1.25% on Wednesday, the third such increase this year, to keep inflation in check. Inflation eased to 6% in October from 6.4% the precious month. The market expects 2-3 more hikes of 25 bps each in 2023.
• The BoT has trimmed its GDP growth forecast for 2022 to 3.2% from 3.3%, improving to 3.7% next year and 3.9% in 2024, citing the recovery of tourism and private consumption. It projected headline inflation would slow to 3% next year 2023 and 2.1% in 2024.
• The BoT has raised its forecast for international tourist arrivals in 2023 to 22 million, up from 21 million predicted earlier. That compares with 10.5 million expected this year. It expects Chinese tourists to return starting in the second quarter of 2023, and that by 2024 arrivals would reach 31.5 million.
• Authorities plan to allocate 5% of the state budget each year to support new investment projects, mainly in the Eastern Economic Corridor, which is being positioned as a high-tech industrial hub.
• Entrepreneurs have flocked to invest in the frozen food business, with new company registrations rising 84% to 92 in the first nine months, driven by rising domestic and export demand.
• The Manufacturing Production Index (MPI) fell by 3.7% year-on-year in October as some factories including petrochemical and plastic producers closed for maintenance. The index slipped to 93.89 points from 97.89 in September.
• Automakers in Thailand expect the general election next year to improve sentiment and car sales, which have slowed since October. They also hope the Thailand International Motor Expo, which started on Thursday, will stimulate sales over the 12-day event.
• Thailand is likely to miss its ambitious target of electric vehicles comprising 50% of locally made vehicles by 2030, due mainly limited charging facilities, says the consultancy Arthur D Little. It predicts EVs will make up only 7% of the total by the target date.
• IRPC, the petrochemical arm of PTT Plc, expects global prices of plastics and petrochemical products, which hit a 10-year low in the third quarter, to rise early next year as Covid-19 eases.
• The cabinet has approved 36 billion baht for the phase-3 development of Don Mueang airport, the country's second-biggest gateway, to increase its annual handling capacity to 40 million passengers from 30 million now.
• Bangkok Airways expects revenue to exceed its target and reach 10 billion baht this year with more than 2.6 million passengers, thanks to a surge in domestic travel. In the first nine months it carried 1.7 million passengers or 40% of its pre-pandemic total. Next year it expects foreigners to make up 75% of total passengers, similar to 2019.
• Thai exports shrank for the first time in 20 months in October, as high interest rates and inflation in major trading partners affected purchasing power and economic activity. The dollar value of exports in October fell 4.4% year-on-year, but the total for the first 10 months was still 9.1% higher than the year before.
• The National Energy Policy Council will ask the national oil and gas conglomerate PTT to allocate 6 billion baht to help the government cap power tariffs, part of an effort to slow the surge in electricity bills to record highs.

COMING UP: Opec and its allies will meet tomorrow, with most observers predicting the group will maintain the output cut of 2 million barrels per day that began in November to support oil prices. On Wednesday the Ministry of Commerce will announce November inflation figures. On Dec 14, the US Federal Reserve will announce its final rate decision of the year.

STOCKS TO WATCH: Tisco Securities recommends big-cap stocks such as BBL and BDMS, while DTAC is recommended for short-term trading in hopes that the merger with True Corp can be completed within this year. CENTEL, COM7 and RATCH are expected to be added to the SET50 Index, while PTG will benefit from the decline of oil prices.

• KGI Securities recommends tourism-related stocks as the high season gains momentum. Banking stocks, meanwhile, will benefit from interest-rate hikes and baht appreciation. Its picks for December are BBL, KTB, CPALL, HMPRO, AOT, BDMS, GULF and BGRIM.

TECHNICAL VIEW: Tisco Securities sees support at 1,610 points and resistance at 1,650, while Thanachart Securities sees support at 1,620 points and resistance at 1,660.