Bangkok Post – Asian stocks recover on hopes of political support

SUMMARY: Asian stocks recovered on Friday after a three-day selling streak, helped by a decline in U.S. Treasury yields and a weakening dollar amid optimism for more policy support following disappointing economic data from the U.S., China and Japan.

The SET has once again fallen below the key resistance at 1,350 points as rising political uncertainty dented investor confidence. The index has moved between 1,340.83 and 1,369.68 points this week and yesterday closed at 1,345.66, down 1.4% from the previous week, with the average daily trading volume at level of 56.97 billion baht.

Individual investors were net buyers for 5.93 billion baht, followed by institutional investors for 1.12 billion and brokerage firms for 623.34 million. Foreign investors net sold an amount of 7.67 billion baht.

NEW PRODUCTS: The dollar stabilized after a downward revision to U.S. first-quarter GDP, which suggested the Federal Reserve could cut interest rates this year. The U.S. economy grew 1.3% year-over-year, compared with preliminary estimates of 1.6%, after a downward revision in consumer spending.

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said he wants to see more data in the next few months to make sure U.S. inflation is falling before he supports cutting interest rates. He did not rule out the possibility of an interest rate increase if inflation increases again.

Representatives of the European Central Bank (ECB) signaled a reduction in interest rates at its meeting on June 6, due to the downward trend in inflation towards the 2% target, which allows the ECB to cut rates faster than the Fed.

China has established a $47.5 billion fund for the third phase of an integrated investment campaign to promote the country’s semiconductor, artificial intelligence, 5G wireless technologies and quantum computing industries.

Shanghai announced a policy to revitalize its real estate sector by reducing down payments to 20% for first homes and 30% for second homes, as well as lowering mortgage interest rates. The city of Tianjin has lowered the minimum down payment amount to 15% for a first home and 25% for a second home.

China is considering dumping pork from the EU, which supplied more than half of the 1.55 million tonnes of pork the country imported last year, escalating trade tensions.

Saudi Arabia is preparing to sell shares in the oil giant Saudi Aramco, which is still 90% owned by the government, and is expected to raise about $10 billion this month.

The yield on Japan’s benchmark 10-year government bond hit a 13-year high of 1.1% on Thursday as expectations rose for further tightening of monetary policy by the Bank of Japan.

The International Monetary Fund raised its forecast for China’s economic growth to 5% from the previous 4.6%, reflecting strong expansion in early 2024 and additional government support.

China’s manufacturing purchasing managers’ index fell to 49.5 in May from 50.4 in April, despite strong exports and supportive policies to boost domestic demand.

The Chinese yuan was trading near a six-month low of 7.249 per dollar as the dollar’s strong strength in global markets offset efforts by state banks to shore up the local currency.

Fosun International, one of China’s largest private sector conglomerates, said it would sell German lender Hauck & Aufhauser Lampe to Dutch bank ABN Amro for €672 million.

Nvidia shares have surged to record highs amid speculation about an upcoming 10:1 stock split and optimism that it will become a major supplier of AI chips to companies like xAI. Apple shares also rose after iPhone shipments in China surged 52% in April following price cuts.

XAI, Elon Musk’s artificial intelligence company, said it had raised $6 billion, helping fill a funding gap with OpenAI, Anthropic and other rivals in the red-hot industry.

Google on Thursday confirmed it would invest $2 billion in Malaysia to establish the country’s first data center and “cloud region.”

Toyota Motor’s global sales and production fell 0.5% year-on-year in April, while a 27% decline in China and a 14% decline in Japan offset double-digit growth in the US and Europe.

Public policies such as a carbon tax and innovations including artificial intelligence and nuclear energy are key to Thailand’s efforts to achieve zero carbon emissions targets, Charoen Pokphand Group CEO Suphachai Chearavanont said on Thursday.

Goldman Sachs expects the Bank of Thailand to start cutting interest rates in the first half of 2025, rather than the second half of this year, as the government plans to spend more to support economic growth, reducing pressure on the central bank to cut interest rates.

The government approved an additional budget of 122 billion baht and an additional 112 billion baht in loans to finance the digital wallet, raising public debt to 68% of GDP.

Thailand’s industrial production rate is expected to remain flat or increase by 1% year-on-year in 2024, with climate change among the threats threatening the sector, the Bureau of Industrial Economics said.

Amazon Web Services is ready to launch its new data center in Thailand early next year as part of a commitment announced in 2022, and will invest more than 190 billion baht in the country by 2037.

Diesel prices rose by another 50 satang to 32.94 baht per liter yesterday as energy policymakers refused to further increase subsidies. The government previously said it would cap diesel prices at 33 baht, but the Petroleum Fuel Fund has now incurred a debt of 111 billion baht from subsidizing fuel prices.

The National Council for Economic and Social Development has expressed concern about rising household debt, which has now reached 91% of GDP, in the face of falling incomes.

The Ministry of Finance is considering amending the act that will enable people with bad credit history to regain access to loans faster, as currently people with bad debts have been on a blacklist for 8 years.

To promote tourism, the government has extended visa-free stay to 60 days for citizens of 93 countries. It also eased health insurance requirements for foreign retirees and will allow foreign students at Thai universities to stay in the country for a year after graduation.

The Tourism Authority of Thailand said foreign tourist arrivals for May 20-26 increased by 4.3% from the previous week, bringing the year-to-date total to 14.3 million and generating about 683 billion baht in revenue.

The Ministry of Finance will analyze the sale of more than 30 billion baht of state-owned shares, focusing on assets obtained through lawsuits and seizures to realize their economic value.

A recovery in tourism helped support listed companies, which saw total first-quarter revenue rise 4.6% year-on-year to 4.4 trillion baht, while net profit rose 1.7% to 265 billion baht. SET reported that 646 companies reported net profits, accounting for almost 80% of the total.

The Ministry of Finance expects land and building tax revenues to reach 43 billion baht this year, 8 billion more than last year, after the abolition of the tax cut.

Listed SET Ratch Group, the energy arm of Thailand’s electricity generation authority, expects to soon complete six new power plant acquisitions with a total capacity of 550 megawatts in Thailand, Indonesia, Laos, the Philippines and Australia.

Krungthai Asset Management has joined forces with Kiatnakin Phatra Securities to launch private funds in the US, aiming to generate high returns from its growing private lending business there.

INCOMING: On Monday, updates will be released for manufacturing PMIs in the US, euro zone and UK, UK retail sales and Australia’s current account. On Tuesday, the U.S. releases monthly factory orders, China releases its services PMI, and Australia releases its GDP update. On Wednesday, the US PMI for employment, services and non-manufacturing industries. The Bank of Canada holds an interest rate meeting and Russia reports GDP every month.

The European Central Bank will hold an interest rate meeting on Thursday and is widely expected to approve a cut. Japan will release its household spending report for April, and China will release a trade update. On Friday, the US will release data on May non-farm payrolls, average wages and the unemployment rate.

Stock exchanges to watch: Yuanta Securities recommends stocks of companies that will see further growth in June, including transportation companies related to freight rates, containers and forwarding, where prices are lagging, recommending stocks of companies that are likely to continue to rise. The best choice is WICE.

Stocks related to exports, in particular rubber prices, include STA, NER and TEGH. Food and beverage stocks such as COCOCO and PLUS are also interesting. In electronics, Yuanta recommends HANA.

Shares of mining and refinery companies are expected to be subject to speculation on the trend in crude oil prices, which is influenced by the boom season, demand in China and geopolitical factors. Recommended actions are PTTEP, SPRC and BSRC.

Additionally, Yuanta says investors should diversify their portfolios to avoid being impacted by domestic political uncertainty. Assets such as Korean funds (SCBKEQTG), AI funds (MEGA10AI) and depositary receipts such as STEG19 are recommended.

TECHNICAL VIEW: InnovestX Securities sees support at 1330 and resistance at 1375. DBS Vickers Securities sees support at 1330 and resistance at 1384.