WALL STREET ROUT ROCKS WORLD AS HIGHER RATES FORESEEN

Recap: A plunge on Wall Street on Monday and Tuesday led to a global stock market rout, as investors speculated that looming inflation would force the Federal Reserve to raise interest rates faster than expected earlier. US government bond yields jumped as a result.

Despite a modest rebound in global markets, another four-digit plunge by the Dow on Thursday caused major Asian stock markets to suffer sharp losses yesterday, with Japan’s Nikkei 225 index shedding 2.3% and China’s Shanghai Composite falling by 4.1%.

Amid the global turmoil, the SET index moved in a range between 1,758.31 and 1,813.94 points before closing at 1,786.45, down 2.2 % from the previous week, in heavy trade averaging 79.7 billion baht a day. Foreign investors were net sellers of 21.45 billion baht and brokers sold 2.4 billion. Retail investors were net buyers of 23 billion baht and institutional investors bought 801 million.

Newsmakers: The US government briefly shut down for the second time this year after Congress failed to meet a deadline to vote on a new budget. However, lawmakers resolved differences later in the day, with the House of Representatives approving a measure to fund the government through March 23.

The Bank of England has indicated that the pace of interest rate increases could accelerate if the economy remains on its current track. Policymakers kept the benchmark rate at 0.5% at their latest meeting but said rates would need to rise “earlier” and by a “somewhat greater extent” than they thought at their last review in November.

Euro zone economic growth is likely to slow slightly this year and next from its fastest expansion in a decade last year, the European Commission forecast on Wednesday. It forecasts GDP expanding by 2.3% this year and 2.0% in 2019.

Samsung heir Lee Jae-yong has been freed from jail after a South Korean court suspended his five-year jail term for bribing the country’s ex-president. The Seoul High Court upheld parts of the conviction, but used its discretion to release the executive.

The central bank of Bangladesh will file a lawsuit against a Philippines bank for its role in one of the world’s biggest cyber-heists two years ago, a deputy governor said. Unidentified hackers stole US$81 million from Bangladesh Bank’s account at the New York Fed in February 2016, using fraudulent orders on the Swift payments system.

The value of bitcoin fell below $6,000, its lowest price since November 2017, as investors feared further curbs on trading in more countries. Thailand will not ban cryptocurrency trading, says Finance Minister Apisak Tantivorawong, but a regulatory framework to govern digital currencies will become clearer within a month.

Construction tycoon Premchai Karnasuta could face up to 28 years in jail if found guilty of all charges related to illegally poaching wildlife in the Thungyai Naresuan sanctuary in Kanchanaburi province. The discovery of butchered rare animals outraged the public and could even have consequences for SET-listed Italian-Thai Development Plc, which derives considerable revenue from big government contracts.

Cash-strapped Pace Development Corporation Plc plans to sell land plots in Hokkaido worth 595 million baht to repay short- and long-term loans. It told the SET that its board had approved the disposition of 31 plots totalling 87 rai in Niseko subdistrict on the island in northern Japan.

Thais are expected to splash out 60.7 billion baht during the Lunar New Year holiday and Valentine’s Day. Chinese New Year, which runs from Feb 14-16, is expected to trigger 56.9 billion baht in spending, the highest in 10 years and up 3.5% from last year’s season, said the University of the Thai Chamber of Commerce.

A strong baht and higher wages may slow Thailand’s export growth to as low as 3.5% this year after a nearly 10% expansion last year, says a group of Thai shippers.

Small and medium enterprise (SME) optimism for the three months to March has fallen as firms worry that imminent minimum wage increases and rising energy costs will push up their operating costs, according to a quarterly survey by TMB Analytics.

Consumer confidence rose for the sixth straight month in January, hitting a three-year high, driven by expectations of improved economic conditions stemming from expansion in exports and tourism. The consumer confidence index rose to 80, up from 79.2 in December and was the highest in 36 months.

Coming up: China will release January yuan lending and Singapore will release January retail sales on Monday.

Tuesday’s calendar includes Japanese producer prices and Chinese auto sales for January, Australian business confidence and UK inflation data.

On Wednesday, the Bank of Thailand’s Monetary Policy Committee will hold its first meeting of the year. Japan and Germany will release fourth-quarter 2017 GDP estimates, and China will update January FDI figures. The US will release January retail sales and consumer prices, as well as December business inventories.

Stocks to watch: DBS Vickers Securities offers four investment themes: recovery plays, such as AMATA with a target price of 30 baht; dividend plays, such as KKP (target price 88 baht); growth plays such as IVL (target price 65 baht); and tourism including ERW (target price 10.50 baht). It recommends accumulating these shares when prices move lower.

Finansia Syrus Securities recommends domestic and dividend stocks as well as accumulating shares with good fundamentals. Its monthly stock recommendations are AMATA, BBL, BCH, MGT and SAPPE.

Technical view: Asia Wealth Securities sees support at 1,753 points and resistance at 1,800. KT Zmico Securities sees support at 1,750 points and resistance at 1,800.