Krungsri Securities forecast the Stock Exchange of Thailand (SET) Index on Thursday (October 28) would fall to between 1,615 and 1,620 points.
It said negative sentiment of falling oil price after the US oil storage had risen by 4.3 million barrels, plus mass sell-offs of shares amid worries over the European Central Bank would taper its quantitative easing (QE) programme during the meeting today, would pressure the index.
“However, mass buy-ups of shares whose third-quarter profit is expected to grow would help the index to rebound,” Krungsri Securities said.
It also recommended buying of the following companies’ shares as an investment strategy:
▪︎ GULF, CHG, BCH, BDMS, KCE and JMT, whose third-quarter profit is expected to grow.
▪︎ HMPRO, CPALL, TNP and KK, which benefit from the government’s economic stimulus measures.
The European Central Bank insists the current price spike will ease, though officials most up-to-date view will be revealed at a decision on the eve of those reports along with their assessment of an economy whose snapback from the pandemic is going awry.
ECB President Christine Lagarde highlighted the threat this month when she said that “the global economy could increasingly be a source of shocks for Europe rather than a stabilizer.” In Germany, the growth motor of the region, the government lowered its outlook on Wednesday after carmakers cut production due to semiconductor shortages.
“We were always going to see a slowdown to the spectacular growth rates that we saw after reopening, but of course these are additional drags,” said Nick Kounis, an economist at ABN Amro. “It does slow progress down in terms of let’s say, a full recovery.”
Friday’s third-quarter data may still be impressive to behold, with a stream of robust numbers around the region. They start with French growth at 7 a.m. in Paris, which forecasters anticipate doubling to 2.2% from 1.1% in the prior three months.
Of the largest four economies, only Italy is expected to show slowing, though with output still up 2%. The euro-zone report at 11 a.m. may reveal similar expansion to the previous quarter, with economists forecasting 2.1%.
Inflation data for October probably accelerated further however. While the median prediction is for 3.7%, the fastest since 2008, Natixis reckons the surge could be half a percentage point higher.
The Bundesbank expects price increases to keep spiking in Germany before they eventually ease, signifying an intensifying squeeze on living costs that is playing out elsewhere too. France has already announced a one-off payment of 100 euros ($116) to lower-paid workers to cushion the blow.
Accompanying the inflation shock are supply bottlenecks already being felt in indexes of purchasing managers. A gauge of business activity in the region slipped to its slowest in six months in October, with optimism clouded by logistics concerns.
Economists surveyed by Bloomberg expect such effects to markedly moderate expansion in the final quarter of the year, with the pace of output seen halving to 1%.
In a hint of what the ECB will say, Bank of Italy Governor Ignazio Visco acknowledged the headwinds on Bloomberg Television last week, even though he cautioned that the euro-area economy is still in a much better shape than anticipated.
“It has sightly softened in the last few weeks,” he said. “The impact of the bottlenecks and shortages is there.”
For Germany, the economy as a whole will now grow only 2.6% this year, compared with a prediction of 3.5% at the end of April. Economy Minister Peter Altmaier told ARD television that a future pickup will depend on disruption fading in global logistics.
“The precondition is that we stabilize international supply chains, and, for example, make sure that more of the chips that are built into almost every device, especially cars, are produced,” he said.
What could still help absorb the price squeeze and slowing growth is a hoard of almost 400 billion euros accumulated by consumers during lockdowns.
“I would not be overly concerned,” said UniCredit economist Marco Valli. “Households have this big buffer thanks to excess savings that will provide them with a bit more of a cushion compared to previous energy shocks.”
U.S. stocks dropped from all-time highs, with shares of small companies leading declines, and Treasurys gained on an uptick in growth concerns.
The S&P 500 and Dow Jones industrial average fell after setting closing records Tuesday. The tech-heavy Nasdaq 100 set an intraday record before closing barely in the green with Google parent Alphabet Inc., Amazon.com Inc. and Tesla Inc. rallying. Robinhood Markets Inc. slumped after missing revenue estimates. The Russell 2000 slumped 1.9%, the biggest decline since late September.
“Earnings are one of the bigger factors with better than expected results out of a lot of sectors,” said Ross Mayfield, investment strategy analyst at Baird. “Some of the fears of inflation or margin pressure are not yet being realized despite the problem being so well-known and probably discounted by the market a bit.”
Long bonds continued to outperform shorter-maturity U.S. debt ahead of the government’s auctions of five-year notes Wednesday and a seven-year sale Thursday. The yield difference between 5- and 30-year bonds narrowed to as little as 78 basis points, the lowest since March 2020.
Mining and energy stocks led a retreat in the Stoxx Europe 600 index as prices of raw materials including aluminum and iron ore fell along with crude oil. Germany’s DAX underperformed after Europe’s biggest economy cut its 2021 growth forecast, citing the lingering effects of the pandemic and a supply squeeze. Bund yields dropped along with those on other European bonds.
Investors are counting on earnings to support equity prices, and so far the reporting season has been solid overall. But worries remain that over time rising raw material and wage costs and supply-chain snarls could crimp margins and weigh on the global economy recovery.
“Equities moved higher last week, fully recovering from the September dip. That said, in our view, last week’s positive performance does not create head winds for performance ahead,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “Market positioning is still approximately neutral, which could point to further upside potential in equity markets. We believe recent positive market moves could be the beginning of a now-earlier ‘Santa Clause rally.’ “
The debt crisis in China’s property sector continues to hang over the market: authorities told billionaire Hui Ka Yan to use his personal wealth to alleviate China Evergrande Group’s woes. Meanwhile, a top Chinese regulator called on companies to make “active preparations” to meet payments on offshore bonds.
Bitcoin fell below $60,000. On the virus front, a Food and Drug Administration panel gave its backing to the Pfizer Inc. and BioNTech SE vaccine for young children.
Some of the main moves in markets:
Stocks
– The S&P 500 fell 0.5% as of 4:07 p.m. EDT
– The Nasdaq 100 rose 0.3%
– The Dow Jones industrial average fell 0.7%
– The MSCI World index fell 0.5%
Currencies
– The Bloomberg Dollar Spot Index was little changed
– The euro was little changed at $1.1600
– The British pound fell 0.2% to $1.3739
– The Japanese yen rose 0.3% to 113.85 per dollar
Bonds
– The yield on 10-year Treasurys declined seven basis points to 1.53%
– Germany’s 10-year yield declined six basis points to -0.18%
– Britain’s 10-year yield declined 12 basis points to 0.99%
Commodities
– West Texas Intermediate crude fell 3% to $82.10 a barrel
Despite the Covid-19 fallout, the food and beverage industry has proved to be a stable income generator for most Thai exporters.
Ronnarong Poonphiphat, director of the Trade Policy and Strategy Office (TPSO), said food and beverage exports accounted for 73 per cent of total exports in the first eight months of this year. Also, she said, 81 per cent of raw materials produced in the country were used in the manufacturing of food and beverages.
Last year, the food and beverage industry earned more than US$20.5 billion and has brought in $14.05 billion in the first eight months of this year.
Ronnarong said that in order to maintain such earnings, operators will need to follow global food trends, especially in the “new normal” when consumers are focusing more on healthy alternatives.
With Thailand reopening on November 1 and the export sector moving in a positive direction, Finance Minister Arkhom Termpittayapaisith reckons the economy will grow by at least 1 per cent this year.
He said the economy is bound to pick up in the last quarter, though some parts of the country still face the risk of flooding.
The recovery of the tourism sector is expected to be gradual as the government will slowly open different parts of the country based on the rate of Covid-19 infections. Though many operators are positive that the tourism industry will start booming again next year, some do not believe the number of arrivals will reach pre-Covid levels any time soon.
The Stock Exchange of Thailand (SET) Index closed at 1,627.61 on Wednesday, down 8.36 points or 0.51 per cent. Transactions totalled 69 billion baht with an index high of 1,635.68 and a low of 1,626.56.
The index fell after rising by 1.77 points or 0.11 per cent on Tuesday.
In the morning session, Krungsri Securities forecast the SET Index on Wednesday would fluctuate between 1,625 and 1,645 points.
It said the index gained positive sentiment from rising oil price in line with economic recovery and mass buy-ups of stocks whose third-quarter profit is expected to grow.
“However, investors’ mass sell-offs of stocks to escape risk before the meeting of the European Central Bank on October 28 and Federal Reserve on November 2-3 would pressure the index,” Krungsri Securities said.
The 10 stocks with the highest trade value today were BANPU, KCE, SCGP, KBANK, AOT, IVL, SCB, PTT, PTTEP and DELTA.
Other Asian indices were down with one exception:
Japan’s Nikkei Index closed at 29,098.24, down 7.77 points or 0.027 per cent.
China’s Shanghai SE Composite closed at 3,562.31, down 35.33 points or 0.98 per cent, while the Shenzhen SE Component closed at 14,393.51, down 159.31 points or 1.09 per cent.
Hong Kong’s Hang Seng Index closed at 25,628.74, down 409.53 points or 1.57 per cent.
South Korea’s KOSPI Index closed at 3,025.49, down 23.59 points or 0.77 per cent.
Taiwan’s TAIEX Index closed at 17,074.55, up 40.21 points or 0.24 per cent.
The baht opened at 33.20 to the US dollar on Wednesday, weakening from Tuesday’s closing rate of 33.12.
The Thai currency is likely to move between 33.10 and 33.25 during the day, Krungthai Bank market strategist Poon Panichpibool predicted.
Poon said that the default crisis of Chinese real estate companies might pressure the Asian currency market and cause the baht to weaken. Moreover, investors selling Asian assets will cause currencies in Asia to weaken.
Meanwhile, foreign investors slow down in investing in Thai stocks because they are waiting for the basic economy factor in Thai to be better. Investors are waiting to see the economy after the country opening in November.
Poon also predicted that the gold trading also cause the baht to be volatile. Investors will sell the gold which will cause the baht to strengthen if the price goes up nearly 1,800 dollars per ounce.
The key resistance level for the baht would be at 33.40 to the dollar, which is the level at which exporters might sell the US currency.
The price of gold dropped by THB100 in morning trade on Wednesday.
A9.27am report from the Gold Traders Association showed the buying price of gold bar at THB28,050 per baht weight and selling price at THB28,150, while the buying and selling price of gold ornaments is THB27,545.72 and THB28,650, respectively.
At close on Tuesday, the buying price of gold bar was THB28,150 per baht weight and selling price THB28,250, while gold ornaments were THB27,636.68 and THB28,750, respectively.
The spot gold price on Wednesday morning was hovering around US$1,789 (THB59,520) per ounce after Comex gold at close on Tuesday dropped by $13.4, fell from the $1,800 level to $1,793.4 per ounce due to pressure from selling the precious metal for profit after the gold price has risen for several days in a row, including the appreciation of the US dollar.
Krungsri Securities forecast the Stock Exchange of Thailand (SET) Index on Wednesday (October 27) would fluctuate between 1,625 and 1,645 points.
It said the index gained positive sentiment from rising oil price in line with economic recovery and mass buy-ups of stocks whose third-quarter profit is expected to grow.
“However, investors’ mass sell-offs of stocks to escape risk before the meeting of the European Central Bank on October 28 and Federal Reserve on November 2-3 would pressure the index,” Krungsri Securities said.
It also recommended buying of the following companies’ shares as an investment strategy:
▪︎ PTT, PTTEP, TOP, PTTGC, SPRC and BCP, which benefit from rising oil price and gross refining margin.
▪︎ GULF, CHG, BCH, BDMS, KCE, JMT, PSL, TTA, BANPU and LANNA, whose third-quarter profit is expected to grow.
▪︎ HMPRO, CPALL, TNP and KK, which benefit from the government’s economic stimulus measures.
The SET Index fell by 4.05 points or 0.25 per cent to 1,631.92 on Wednesday morning, witnessing a high of 1,633.57 and a low of 1,630.38 in opening trade.
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