Global sell-off intensifies on signs of US weakness

RECAP: A global stock sell-off intensified yesterday as concerns grew over the health of the US economy and disappointing forecasts from major tech firms. Japanese shares plunged on expectations for more interest-rate hikes, further darkening the mood.

The SET index moved in a range of 1,306.22 and 1,329.76 points this week, before closing yesterday at 1,313.08, up 0.4% from the previous week, with daily turnover averaging 38.19 billion baht.

Brokerage firms were net buyers of 751.08 million baht, followed by foreign investors at 195.89 million. Institutional investors were net sellers of 492.63 million baht, followed by retail investors at 454.34 million.

NEWSMAKERS: The Federal Reserve left its key interest rate unchanged as expected, but chairman Jerome Powell said he was seeing "good data" about "broader disinflation", indicating a willingness to start cutting rates in September. The personal consumption expenditures index, the Fed's preferred inflation gauge, was up 2.5% year-on-year in June, in line with market expectations.

• Futures contracts tied to the Fed's policy rate in US markets now show investors pricing in an 87% chance of a 25 basis-point cut in September.
• The US manufacturing purchasing managers' index (PMI) last month tumbled to 46.8, its lowest since November, from 48.5 in June, against market expectations of an increase, as manufacturing activity entered deeper into contraction.
• US private sector employment in July increased by only 122,000 positions, the lowest since January. New applications for unemployment benefits rose to an 11-month high last week, suggesting softening in the labour market and building a case for lower interest rates.
• The US chipmaker Intel said on Thursday that it would slash more than 15,000 jobs, or 15% of its global workforce, as part of a turnaround plan. Together with a capital spending cut and other moves, it aims to lower costs by $10 billion in 2025.
• Japan's central bank on Wednesday raised interest its key policy interest rate to a still-low 0.25%. The move bolstered the ailing yen and could help ease the burden of consumers paying more for imported essentials.
• The yen has shot up by 8% in three weeks to about 149 to the dollar, in a rally that has caught market participants off guard. Foreign investors offloaded Japanese equities for a second week, the most since last September, as the stronger yen weighed on the market.
• The Bank of England cut interest rates by a quarter percentage point to 5% on Thursday, but the 5-4 vote showed policymakers were split over whether inflation pressures had eased sufficiently.
• Russian lawmakers passed a bill that will allow businesses to use cryptocurrencies in international trade, as part of efforts to skirt sanctions imposed after Russia's invasion of Ukraine. The move is supported by the governor of the central bank.
• German GDP unexpectedly shrank 0.1% in the second quarter, showing that the euro zone's biggest economy is failing to take off despite the easing of inflation pressures.
• The Opec+ alliance decided to maintain its total production cuts of 5.86 million bpd, while signalling that members might begin to restore some production starting in October if prices remain stable at around the desired levels of $80 a barrel.
• Chinese industrial company profits in June rose 3.6% year-on-year and 3.5% in the first half. However, fuel imports fell 11% in the first six months, raising market concerns about sluggish demand in the world's largest oil importer.
• China's National Development and Reform Commission said there were no plans for additional economic stimulus in the second half of 2024, with the focus instead on fostering new economic growth drivers.
• Activity in China's manufacturing sector shrank slightly in July as demand declined for the first time in 12 months, indicating that the economic slowdown in the second quarter could carry over into the third.
• iPhone shipments in China in the second quarter slipped 3.1% year-on-year, while Android smartphone shipments grew 11%. This pushed Apple out of the top 5 smartphone brands in China for the first time in four years.
• Toyota Motor Corp said its net profit in the three months to June rose 1.7% from a year earlier to a record 1.33 trillion yen ($8.9 billion), as a boost from a weaker yen offset losses caused by a series of quality-control scandals.
• Mitsubishi Motors will join a strategic partnership formed between Nissan and Honda to develop electric vehicles in a bid to catch up with powerful overseas rivals, the Japanese automakers said on Thursday.
• The Chinese tech company Xiaomi Corp has purchased a plot of land in Beijing for 842 million yuan ($116 million) to expand electric car production following the early success of its debut sedan.
• Thailand's Industrial Production Index contracted by 1.7% year-on-year in June, with capacity utilisation at 58.4%, due to weak purchasing power, high household debt and interest rates, rising energy costs, and an influx of imported goods, the Office of Industrial Economics said.
• The Ministry of Finance has identified household debt as a major issue for the Thai economy, focusing on resolving car and credit card debt. The Bank of Thailand (BoT) has said it will consider reducing the minimum credit card debt repayment to 5% again to help address bad loans. The 5% minimum was in effect during the pandemic, reduced from the normal 10%, but it was raised back to 8% this year.
• The BoT plans to further ease foreign exchange regulations to support the ease of doing business. Key changes include raising the annual outflow limit from US$50,000 to $200,000.
• The Energy Regulatory Commission said the average electricity tariff would remain unchanged at 4.18 baht per unit for the September-December period. Users consuming less than 300 units a month will continue to be charged 3.99 baht a unit.
• More than 16 million Thais registered for the government's flagship digital wallet handout on Thursday, the first day of sign-ups for smartphone users. Registration for those without smartphones will begin on Sept 16.
• The Ministry of Finance has revised its 2024 GDP growth forecast upward from 2.4% to 2.7%, with potential growth up to 3%, supported by tourism and exports. The digital wallet handout of 10,000 baht to as many as 45 million people is expected to stimulate growth by 1.2% to 1.8%, it said.
• Startups with high growth potential in targeted industries will be given financial support, worth up to 50 million baht each, under a new fund launched by the Board of Investment.
• The Public Debt Management Office will sell savings bonds worth 40 billion baht in August, reduced from the original plan of 60 billion baht.
• The cabinet has approved new criteria for the ThaiESG fund, increasing the tax deduction limit to 300,000 baht from 100,000 baht, and reducing the holding period to five from eight years. Authorities expect 20-30 billion baht in new investments in the funds, which should help lift the stock market.
• The cabinet has approved incentives, including a cut in the top personal income tax rate to 17% from 35%, for skilled Thais working abroad to return and work in 15 target industries.
• The Ministry of Commerce said the value of Thai exports in June was $24.8 billion, down 0.3% from a year earlier, while imports were up 0.3% at $24.6 billion, with a trade surplus of $218 million.
• The ministry has revised its rice export forecast for this year to 8.2 million tonnes after first-half shipments reached 5 million tonnes, up 25.1% year-on-year, supported by increased demand, Indian export curbs and a weaker baht. However, the revised total is still lower than the 8.8 million tonnes exported last year.

COMING UP: On Monday, the US will release services and non-manufacturing PMI and Japan reports monthly household spending. The Reserve Bank of Australia will hold a rate meeting on Tuesday, and the US will report June trade figures. On Thursday, the US will release initial jobless claims and the Fed balance sheet, and China will report monthly inflation. Friday will bring German inflation figures and Russian quarterly GDP.

• Locally, the Ministry of Commerce on Monday will update digital wallet registration for shops. On Tuesday, the Thai National Shippers' Council will discuss June export figures.

STOCKS TO WATCH: Tisco Securities recommends stocks expected to report good second- and third-quarter performance, especially those linked to exports and foreign demand such as AMATA, CENTEL, CPF, DMT, ITC and KCE.

• Among stocks considered oversold, Tisco recommends AP. It also recommends COM7 because H2 profits are expected to be better than in H1, with some specific short-term drivers.
• KGI Securities (Thailand) said investment sentiment in August has improved, so look for stocks that will benefit from political clarity and an expected pickup in GDP growth, as well as economic and stock market stimulus measures. Its picks include:
• BBL and KTB as banks with low business risk and high NPL buffers; CPALL as a beneficiary of the digital wallet plan. BEM expects Q2 profit to increase strongly, and the Orange Line train project offers long-term upside. TRUE expects core business profit to recover with a 36% quarter-on-quarter gain in the three months to June.

TECHNICAL VIEW: Tisco Securities sees support at 1,280 points and resistance at 1,350. Trinity Securities sees support at 1,270 and resistance at 1,340.