The relief rally triggered by the Fed's rate hike and clearer QT plan proved short-lived, capping the scope for upside to the SET. The soft 2Q22 profit outlook (due to inflation) should make for lower stock prices, so good opportunities to take positions. Despite headwinds, the decent growth outlooks for Thai equities (from low 2021 bases) and the tourism revival limit downside risk. We expect a 2Q22 trading range of 1580-1700. Inflation hedges and reopening/tourism plays remain the core allocation. Also, anticipation of “near” peak inflation and peak hawkishness mean that high-quality growth stocks with clear earnings visibility and high dividend yields should be on the watchlist.
50bps FFR hike and QT plan in line, but rebound short-lived
On May 4 the US Federal Reserve raised its Federal Funds Rate (FFR) by 50bps to a range of 0.75-1% and laid out its quantitative-tightening (QT) plan—for the period Jun-Aug it will not roll over US$47.5bn/month in maturing bonds; thereafter, it will discontinue rolling over $95bn/ month in maturing bonds. US stock markets rose on the news, but the rally was short-lived, as headwinds remain salient. We expect two further 50bps rises and a 25bps increase to the FFR by YE22.