Asian rally continues in response to China stimulus

RECAP: Stocks in Asia extended gains yesterday as risk appetite across financial markets got a further boost from a series of stimulus measures in China, where stock markets had their best week since 2008. A sharp fall in oil prices also bodes well for disinflation globally.
The SET index moved in a range of 1,442.02 and 1,471.69 points this week, before closing yesterday at 1,450.15, down 0.1% from the previous week, with daily turnover averaging 58.56 billion baht.
Brokerage firms were net buyers of 1.23 billion baht, followed by foreign investors at 1.11 billion. Retail investors were net sellers of 2 billion baht, followed by institutional investors at 334.09 million.
NEWSMAKERS: US Treasury Secretary Janet Yellen said on Thursday that labour market and inflation data suggest the economy is on a path to a soft landing, but the “last mile” towards calming inflation involves bringing down housing costs.
The US economy grew at a 3% annualised pace in the second quarter, a faster rate than analysts had expected and well above the 1.4% seen in the first quarter. Initial jobless claims fell to 218,000, lower than expected, easing concerns about labour market weakness and recession.
Federal Reserve Bank of Minneapolis president Neel Kashkari said he expected the Fed to lower interest rates by smaller, quarter-point moves at each of its two remaining meetings this year. Atlanta Fed president Raphael Bostic said he saw no need for a “mad dash” to lower rates.
The US consumer confidence index unexpectedly fell in September by 6.9 points, the most in three years, to 98.7 on concerns about the labour market and the outlook for the broader economy.
Chinese regulators announced their biggest stimulus since the pandemic, saying they would cut bank reserve requirement ratio by 50 basis points, freeing up 1 trillion yuan ($140 billion) for new lending, while reducing mortgage rates.
The Chinese government announced cash handouts to 4.74 million impoverished citizens, totalling 155 billion yuan (about 32,000 yuan per person), ahead of National Day on Oct 1.
China’s industrial profits swung back to a sharp contraction in August, plunging 17.8% from a year earlier. Profits had risen 4.1% year-on-year in July.
Australia’s central bank held its key interest rate at a 12-year high of 4.35% as it tries to subdue stubborn price pressures that are preventing it from joining a global easing cycle.
Oil prices were on course for a substantial weekly decline on prospects of more supply from Opec and its allies. Brent crude traded near $72 a barrel and is around 4% lower this week. Saudi Arabia is reportedly committed to Opec+ raising production on Dec 1 and dropping its unofficial $100 oil price target to win back market share.
Micron Technology shares gained the most in nearly 13 years after the largest US maker of computer memory chips said fiscal first-quarter revenue would be about $8.7 billion, well above estimates of $8.3 billion, with profit also topping forecasts.
Gold hit a new high of $2,685 on Thursday, buoyed by China stimulus and rising Mideast tensions, while US data point to a “soft landing” scenario.
Vietnam projects its semiconductor industry will generate up to $25 billion annually, with 10-15% yearly growth by 2030. It aims to become a leader in some production chain steps by 2040-50.
Thailand’s underperforming $77-billion Social Security Fund is preparing to invest $11.6 billion in a new foray into global private assets, part of a strategic overhaul to address poor returns amid rising demand from an ageing population, Reuters reported.
The baht recorded its eighth consecutive day of gains on Friday, appreciating to 32.35 per dollar, its highest level since early March 2022. The baht and ringgit are among the best-performing currencies in the region this month, advancing more than 4% each.
Officials from the Ministry of Finance are scheduled to discuss the inflation framework and exchange rate issues with the Bank of Thailand next week. The central bank said it was committed to managing the baht’s appreciation, with a view to easing its impact on the real economy.
Labour Minister Phiphat Ratchakitprakarn said the increase in the daily minimum wage to 400 baht might not happen by Oct 1, after the national wage committee meeting failed to reach a quorum for the second time.
The Bank of Thailand has received five applicants for the three virtual bank licences that it expects to award in mid-2025. They are KTB-OR-ADVANC; BTS/VGI-BBL-Sea Group-Sahaphat-Thailand Post; SCBX-KakaoBank-WeBank; True Money-Ant Group; and Lightnet Group-WeLab.
The Asian Development Bank (ADB) has cut its economic growth forecast for Thailand to 2.3% in 2024 and 2.7% in 2025, from previous estimates of 2.6% and 3.0%, respectively, citing a slowdown in government spending and weaker-than-expected export recovery.
Thai rice export prices fell to a 14-month low this week pressured by quiet demand and competition from cheaper rivals, while India prices edged higher on a stronger rupee.
Thailand’s manufacturing production index is likely to contract by 1% this year, given the declines recorded during the first eight months, caused by a raft of economic problems and the impact of severe floods, says the Office of Industrial Economics (OIE).
The University of the Thai Chamber of Commerce expects the government’s 10,000-baht handout to generate 450 billion baht in economic activity, potentially boosting GDP growth to 2.8% this year.
The value of Thai exports in August rose 7% year-on-year to $26.18 billion, higher than expected, while imports rose 8.9% to $25.92 billion. Agricultural and food exports improved on higher spending in major trade partner countries.
August car exports fell 1.7% year-on-year to 86,066 units, while production fell 20.6% to 119,680 units. Export and production figures were lower than during Covid-19 and close to 1997 crisis levels. Domestic car sales were down nearly 25% to 45,190 units, mainly because lenders have been tightening credit conditions.
SET-listed SC Asset Corporation will invest 20 billion baht between 2025 and 2029 in logistics, hotels and office rentals, aiming to generate a total revenue of 10 billion baht over the five-year period from these recurring income businesses.
COMING UP: On Monday, the UK releases a GDP update and Germany reports monthly inflation. Tuesday brings euro zone inflation, US manufacturing PMI and job openings. Wednesday brings a euro zone unemployment update on Thursday. On Friday, the US announces non-farm payrolls and unemployment rate.
Domestically, the SET’s new president will meet the press on Wednesday and Central Pattana will hold a briefing. On Friday, Booking.com and the Tourism Authority of Thailand will announce a Thai food promotion.
STOCKS TO WATCH: Thanachart Securities sees opportunities in stocks that benefit from the strong baht, notably the Thai AirAsia holding company AAV. Every 1% appreciation of the baht boosts AAV profits by about 1 billion baht.
In the retail sector, MOSHI is recommended as it hedges 30-70% according to product value, and the difference can be used for sales promotions. Assuming 50% hedging and no promotions, every 1% appreciation against the Chinese yuan will increase profits by 1.1% to 1.2%. In the communication sector, ADVANC and TRUE will benefit from reduced capital expenditure on imported equipment.
Asia Plus Securities recommends avoiding stocks with income in dollars such as TU, GFPT, CBG and KCE. Stocks that benefit from baht appreciation are AAV, GULF, GPSC and BCP.
TECHNICAL VIEW: InnovestX Securities sees support at 1,440 points and resistance at 1,475. Daol Securities sees support at 1,435 and resistance at 1,470.