Rate hike concerns spook stock investors

Rate hike concerns spook stock investors

Investors monitor share prices at a brokerage. Pornprom Satrabhaya

Thai stocks extended losses on Monday as investors worry strong US jobs reports and the prolonged Russia-Ukraine war will drive the Federal Reserve to move with more aggressive and quicker rate hikes to fight inflation.

The markets expect the war will keep energy prices high, making it more challenging for central banks globally to control inflation while the global economy slows.

Global stock markets on Monday continued to fall from the week before. The Nikkei 225 opened at 26,705.32, down 298.24, or 1.1%, while the SSE Composite Index opened at 2,990.20, down 11.36. or 0.37%. The Hong Kong stock markets were closed for a public holiday.

According to Dow Jones market data, the Dow Jones Index fell for the sixth straight week, while the Nasdaq closed at its lowest level since 2020. The S&P500 Index also fell for the fifth straight week, the longest stretch since the second quarter of 2011.

The SET Index on Monday closed at 1,604.49, down 25.09 points or 1.54%, with trading worth 81.6 billion baht.

Veeravat Virochpoka, vice-president of Finansia Syrus Securities, said investors are worried that the strong US job numbers will drive the Fed to accelerate interest rate hikes. Traders expect the Fed to raise interest rates by 0.75 percentage points at the next meeting, although Fed chairman Jerome Powell has denied it.

He said inflation could rise further due to the protracted war because long-term energy bans on Russia have failed to deter Russia from attacking Ukraine while oil prices keep rising.

He said if the core inflation rate rises to 3-4%, the Bank of Thailand (BoT) may decide to raise interest rate by a quarter of a percentage point this year from 0.5% to 0.75%.

However, the central bank will also take domestic economic conditions into consideration when deciding whether or not to raise the interest rate, Mr Veeravat said.

Prospects of rate hikes and monetary policy tightening amid high inflation usually drive investors to offload risky assets such as stocks and cryptocurrencies, resulting in price drops, he said.

Mr Veeravat said the SET Index may fall below 1,600 points, and the next support level would be 1,570 points.

For investment strategy in the short term, Finansia recommends consumer and hospital stocks.

Bitcoin dropped below US$34,000 on Monday to its lowest level in four months. Cryptocurrency will recover when inflation is lower and the economy recovers, he said.

“The factors that worry investors the most are inflation and the war. We suggest holding more cash and waiting to invest during a period of market correction,” Mr Veeravat said.