Fed policy and Evergrande debt weigh on sentiment

Recap: European and emerging markets were mixed on Friday as global investors and traders weighed the prospect of reduced US Federal Reserve stimulus and risks from a likely default by the debt-ridden Chinese property developer Evergrande.

The SET index moved in a narrow range between 1,617.31 and 1,642.63 points this week before closing yesterday at 1,625.65, down 0.59% from the previous week, in daily turnover averaging 85.76 billion baht.

Institutional investors were net buyers of 2.95 billion baht, foreign investors bought 682.19 million and brokers purchased 545.27 million baht worth of shares. Retail investors were net sellers of 4.18 billion baht in shares.

Newsmakers: The world’s thirst for oil will exceed pre-pandemic levels next year, with improving vaccination rates and increasing public confidence in governments’ management of Covid-19 are spurring a recovery in travel, the Organization of the Petroleum Exporting Countries said Monday.

Apple CEO Tim Cook strode through a slickly produced video on Tuesday to launch new iPhones and other products, with few hints of the troubles facing the company including policy reversals, a spyware attack and legal fights.

A US judge stopped short of labelling Apple an “illegal monopolist” but legal experts say the ruling in the dispute with the maker of the popular Fortnite game could pave the way for more challenges to the iPhone maker’s restrictive App Store terms and high commissions.

Chinese regulators have ordered sweeping changes to the country’s biggest payment app Alipay, as the ruling Communist Party attempts to rein in the “unruly growth” of the tech giants.

Casino stocks in Hong Kong lost a record US$14 billion in combined market value after officials in Macau said they would tighten restrictions on operators, including appointing government representatives to “supervise” companies in the world’s biggest gaming hub.

Foreign investors are closely watching the debt-crippled Chinese real estate giant Evergrande, but markets do not seem to fear a major contagion, at least so far. With a debt load of $300 billion and cash in short supply, Evergrande may not be able to make an $80-million coupon payment due next week.

More than 60 cryptocurrency exchanges in South Korea could be shuttered by Sept 24 deadline if they cannot comply with new rules that include registering with the Financial Intelligence Unit, providing a security certificate from the internet security agency and ensuring real-name accounts.

Malaysia will consider raising the statutory debt ceiling to 65% of GDP, as part of measures to deal with the economic fallout from the pandemic, the finance minister said on Tuesday. The current 60% ceiling was raised from 55% last year.

Visitors flocked to the Malaysian island of Langkawi on Thursday as it became the country’s first holiday hotspot to reopen after a coronavirus lockdown that has hammered the vital tourism industry.

Thailand’s financial system is stable and there are no big issues for the baht, the Bank of Thailand (BoT) said on Monday, adding that one “pain point” was limited access to credit for some businesses from financial institutions.

Finance Minister Arkhom Termpittayapaisith has instructed the Fiscal Policy Office and the Bank of Thailand to jointly seek ways to relax some of the criteria for state banks to lend to domestic airlines to improve their liquidity.

A Government Housing Bank (GHB) project offering mortgage loans for low-income earners has received an overwhelming response, with applications worth 42 billion baht double the amount earmarked for the scheme, just three days after registration opened.

Bangkok’s residential market will improve next year as supply and demand will be more balanced, while foreign buyers, particularly Chinese, are still interested in Thai property, according to industry executives.

Thailand’s national trade strategy for 2022 to 2027 should focus on upgrading existing export products and services in alignment with modern technology, says a study conducted by Thammasat University for the Commerce Ministry.

Thailand, the world’s third-biggest rice exporter, is expected to meet its target of 6 million tonnes this year as supply-boosting rains and a weaker baht make prices more competitive abroad. But shipments from top-ranked India could reach 22 million tonnes, or 45% of the global total, thanks to expanded port capacity.

The SET expects to launch LiVE Exchange, a fundraising platform for SME and startups, by the end of this year or early next year to give them greater access to the capital market.

The government on Tuesday approved measures to attract “high potential” foreigners, including longer-term visas and tax benefits, to boost the flagging economy. A spokesman said the scheme could inject as much as 1 trillion baht into the economy over five years.

Public Health Minister Anutin Charnvirakul has responded to concerns that the proposed reopening of more tourist destinations to vaccinated foreigners on Oct 1 could be premature, saying the opinions of health experts must be taken into serious consideration.

Bangkok’s reopening for inoculated tourists will be delayed by two weeks, until Oct 15, as most of the city’s residents are still waiting for their second jabs. The Tourism and Sports Ministry is still counting on the capital to welcome at least 1 million international tourists by year-end.

Hoteliers hope the reopening of Bangkok in October and domestic travel stimulus campaigns will boost the occupancy rate from single digits to 15-20% in the upcoming high season.

Phuket hotels have benefitted from more than 524,200 paid room nights since the island reopened to foreign tourists on July 1, with the largest group of arrivals coming from the United States.

Thailand faces roadblocks in attracting travellers from the Middle East because of the complicated certificate of entry application process and costly Covid-19 tests. RT-PCR tests cost 200-300 each in Dubai compared with 8,000 baht charged to visitors for three tests in Thailand, says the Dubai office of the TAT.

PTT Oil and Retail Business Plc (OR), the country’s largest oil trader by volume, plans to establish more business ties with retailers looking for new sales channels at PTT petrol stations following mall closures during the recent lockdown.

PTT and the Taiwan-based multinational electronics manufacturer Hon Hai Precision Industry Co, also known as Foxconn, are pressing ahead with a new joint-venture electric vehicle (EV) production facility worth $1-2 billion in the Eastern Economic Corridor.

The market-leading mall developer Central Pattana Plc (CPN) plans to launch a 1.85-billion-baht mixed-use housing project this month targeting younger buyers.

TQM Corp, the only SET-listed insurance broker, is preparing to enter the personal loan business in the fourth quarter with a new subsidiary aiming to lend 300 million baht this year.

Coming up: New Zealand will release third-quarter consumer sentiment on Monday and Germany will release August producer prices. The US will release August building permits and second-quarter current account data, and Canada will release August new housing prices.

The Federal Open Market Committee will hold a briefing after its highly anticipated policy meeting on Wednesday (early Thursday morning Thailand time). The US will release August existing home sales on Wednesday and Thailand will release August trade figures.

New Zealand will release August trade data on Friday and Japan will release August core consumer prices.

Stocks to watch: Capital Nomura Securities (CNS) recommends stocks of companies that will benefit from the weaker baht, including TU, CPF, NER, XO and APURE. The brokerage recommends SAPPE for beverage stocks, ASIAN for pet food, and SVI, HANA and KCE in the electronics sector. Other stock picks are EPG and BANPU. The government’s proposal to increase the public debt ceiling could benefit construction stocks such as STEC, CK, ITD and PYLON if more public infrastructure spending takes place.

SCB Securities recommends selective buying of healthcare stocks including BDMS, BCH, CHG and RJH. For tourism stocks it suggests ERW. Stocks that will benefit from the launch of the iPhone 13 are COM7 and CPW.

Technical view: Maybank Kim Eng Securities sees support at 1,600 points and resistance at 1,655. DBS Vickers Securities sees support at 1,600 and resistance at 1,650.

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