Today Strategy by Kavee (08 Mar 2023)

2-10 Spread raised fear of US recession

After comments from Federal Reserve Chair Jerome Powell suggested that rates may need to
go higher for longer, fueling fears of a potentially larger hike at the central bank’s next policy
meeting. The rates on 3-month, 6-month, 1-year and 2-year US Treasury notes leapt over 5%
yesterday. At their highs, rates on the 3-month T-bill and 2-year Treasury surged to levels last
seen in 2007, while the yield on the 1-year note touched its highest level since 2006. The
probability of a half-point increase in the next Fed meeting rose to 51.3%. That’s up sharply
from 31.4% a day ago and just 9.2% a month ago. Investors now expect the peak in the funds
level (the terminal rate) to hit a range of 5.5%-5.75% by summer. Specifically, the October 2023
fed funds rate contract implies a terminal rate of 5.58%. The gap between the 2-year US
Treasury yield and the 10-year US Treasury rate widened to 100 basis points during yesterday’s
trading. This spread has not settled at levels this wide since September 22, 1981. The yield
curve inversion is a phenomenon that for half a century has accurately signaled coming
recessions.
2-10 Spread reached lowest level since 1981

However, this isn’t surprising for us, but it’s a tough reminder for markets after such a brisk
rally. Now market know that Fed’s top priority is getting inflation down, and for good reason.
People are starting to factor in persistently higher inflation, which could be the worst-case
scenario for long-term investors and run the risk of prices spiraling higher. We still maintain our
bear market view through third quarter this year before rebounding strongly in 2024.

March 8, 2023 1
Analyst: Kavee Chukitkasem
Thai Market View (Still at accumulate mode)
Despite today SET index will drop following the negative sentiment from US stock market, our
unique positive sentiment should support Thai stock market and limited our downside.
Yesterday, Thai inflation in February came out lower than expected which support our
consumption growth. Moreover, we expect Thai corporates earnings will improve in first
quarter this year. Banks will slow down their provisioning. The decreasing of oil prices will
reduce cost of goods sold in many companies. Services sector will benefit from strong number
of foreign tourists and high domestic consumption during election. Only energy sector
(excluded power plant sector) will still report weak earnings due to lower oil and natural gas. In
addition, we are moving to dividend payment period which support investor to speculate on
dividend and defensive stocks. Thus, we still expect SET index to move sideways up through
early May amid the election rally and dividend expectation. We do not expect much downside
for SET index and see 1620-1630 is the good level to accumulate (with downside at 1600).
Expect market to reach 1680-1700 again before election. But investors need to be cautious
because we believe that market will draw back after election or in May to end of Sep.
Moreover, Thai stock will be pressure from negative sentiment in the second half of this year
from the risk of US recession as we mention earlier.
Today expect SET index to trade in range of 1600- 1615 (accumulate level with downside at
1600).
Top picks Today:

Big Cap: LH HMPRO ADVANC KTB KCE

Mid – Small Cap: COM7 MAJOR M

Theme Investment
• Stock benefit from low inflation: Tourism Commerce Property Bank
• Election Stocks: CK STEC PLANB BEM CPALL WHA AMATA KTB
• REIT and Property fund will benefit from rate hiking cycle peaked: DIF CPNREIT IMPACT
LPF
• Banking sector benefit from strong economic recovery: BBL KTB TISCO
• Energy price drop: RATCH EGCO BGRIM GPSC GULF
• China reopening: CENTEL ERW SHR VRANDA AOT CPALL CPN BJC BAFS BA AAV BEM AP LH
ORI SIRI

March 8, 2023 2
Analyst: Kavee Chukitkasem
 • Tourism sector: CENTEL ERW MINT AOT BAFS CPALL CPN
• Consumer Stocks that will benefit from tourism and election: CPALL HMPRO CENTEL MINT
CPN PLANB COM7 MAJOR
• High Dividend Stocks: AP SPALI LH SIRI ADVANC INTUCH RATCH EGCO BBL KTB TISCO

World News
Highlight Today: Federal Reserve Chairman Jerome Powell suggested that rates may need to go
higher for longer which raise concern on US recession and drag corporate earnings.

US Market (Signal more rate hike from Fed Chairman)

• Stocks sold off sharply yesterday after comments from Federal Reserve Chair Jerome
Powell suggested that rates may need to go higher for longer, fueling fears of a
potentially larger hike at the central bank’s next policy meeting. The Dow Jones Index
shed 574.98 points, or 1.72%, to end at 32,856.46. The S&P 500 lost 1.53% to close at
3,986.37 and below the 4,000 level. The Nasdaq Composite dropped 1.25% to settle at
11,530.33. As the major stock indexes fell, the 2-year Treasury yield jumped to
its highest level since 2007 at 5%. Yesterday’s selloff brings the Dow into negative
territory for 2023, down about 0.9%. The S&P and Nasdaq are up about 3.8% and 10.2%,
respectively, for the year.
• Bank shares led the losses as investors feared more rate hikes will tip the economy into
a recession. Wells Fargo lost 4.7%. Bank of America, Goldman Sachs and JPMorgan
Chase lost about 3% each. Mega-cap tech stocks also tumbled, with Apple, Alphabet and
Microsoft falling at least 1% each.
• Wholesale inventories in the US for January were exactly what economists expected.
Data from the Monthly Wholesale Trade Survey released yesterday showed wholesale
inventories slid 0.4% in January from December.
• The percentage of Apple’s iPhones sold in China has grown about 10% YTD, although
growth decelerated to low single digits in the last three weeks. The firm attributes the
strength to better supply, pent up demand post Covid and price promotions, but said it
doubts it’s sustainable. Meanwhile, February App Store growth surprised to the
downside by posting 1% decline.
• Meta is planning another round of layoffs that could affect thousands of workers as
soon as this week, according to a Bloomberg News report. The job cuts come after the

March 8, 2023 3
Analyst: Kavee Chukitkasem
 company laid off 13% of its workforce in November last year as part of a major cost-
cutting plan.

Europe Market (Stock prices fall after Fed Chairman testimony)

• European markets fell yesterday, as investors followed US Federal Reserve Chair Jerome
Powell’s congressional testimony. The Stoxx 600 closed 0.8% lower provisionally after
trading flat for most of the session, as all sectors slid into the red. Mining stocks led
losses, down 2.5%, while tech stocks fell 1.8%
• Many trains and flights have been cancelled in France, where schools are closed and fuel
deliveries are blocked from leaving refineries, as thousands of workers protest President
Emmanuel Macron’s pension reforms.

Asia Market (Slow China import growth)

• China saw its exports fall by 6.8% in February, declining less than expectations of a 9.4%
drop, according to economist’s consensus. The drop was also less than the previous
month’s fall of 9.9%. Imports also fell 10.2%, down more than expectations to see a
drop of 5.5% on an annualized basis and a further decline from the previous month’s
contraction of 7.5%. The economy’s trade surplus in US dollar terms were at US$116.88
billion, higher than expected and an increase from the previous month’s surplus of
US$78 billion.
• Australia saw a narrowed trade surplus of 11.7 billion Australian dollars in January, a
decline from the previous month. Goods and services imports grew by 5% after seeing a
1% growth in December, while exports for January rose by 1%, also a rise from a decline
of 1% in the previous period.
• The Reserve Bank of Australia raised its cash rate by 25 basis points to 3.60%, in line
with expectations.
• Philippines’ annual inflation data for February rose 8.6% YoY, showing slight signs of
easing from January’s reading of 8.7%, but remained at high levels. The figure came in
lower than expectations of a 8.8% rise, due to a relatively lower rate of inflation in the
transport sector.

March 8, 2023 4
Analyst: Kavee Chukitkasem
Today Strategy by Kavee (08 Mar 2023) Cont.

Bond Market (2-10 Spread over -100 basis points, highest since 1981)

• The yield on the 2-year US Treasury note topped 5% yesterday and rose to its highest
level since 2007 as investors assessed comments from Federal Reserve Chairman
Jerome Powell, who said the central bank may need to increase the pace of interest rate
hikes again. The 2-year Treasury yield was last trading more than 12 basis points higher
at 5.015%. Meanwhile, the yield on the benchmark 10-year Treasury dipped one basis
point 3.97% after briefly topping the key 4% level earlier in the session.
2-year US Treasury note reached highest level since 2007

• Following remarks yesterday from Fed Chairman Jerome Powell, traders upped their
bets that the central bank accelerates to a 50-basis point move at the March 21-22
meeting of the Federal Open Market Committee. The probability of a half-point increase
rose to 51.3% in late-morning trading. That’s up sharply from 31.4% a day ago and just
9.2% a month ago. Previously, markets had largely expected the Fed to hold to the
quarter-point increase it adopted on Feb. 1. That marked a step down from more
aggressive rate hikes in 2022. Traders now expect the peak in the funds level (the
terminal rate) to hit a range of 5.5%-5.75% by summer. Specifically, the October 2023
fed funds rate contract implies a terminal rate of 5.58%.
• US 2-10 spread widened to -1.045% during yesterday’s trading from -0.93 yesterday.
This spread has not settled at levels this wide since September 22, 1981. The yield curve
inversion is a phenomenon that for half a century has accurately signaled coming
recessions. 2-10 spread has been inverted since July 2022. From historical data, it took
about 12-18 months after first inverted before US economic turn to recession. The more
inverted, the more chance of US recession. In my view, despite the US economic
number came out strongly and convince the market to believe no landing or soft-landing

March 8, 2023 5
Analyst: Kavee Chukitkasem
 scenario, but indicators in bond market, which always right in prediction the recession,
point out that US economic is difficult to escape from recession.

Oil Market (Energy price drop from US recession fear and weak China import number)

• Oil prices fell by US$3 a barrel yesterday after comments from US Federal Reserve Chair
Jerome Powell stoked rate hike fears, the dollar strengthened, and top crude importer
China issued weak data. Brent crude futures shed US$2.89, or 3.4%, to settle at
US$83.29 a barrel, while the US West Texas Intermediate crude futures dropped by
US$2.88, or 3.6%, to close at US$77.58 per barrel. Those were the biggest single day
percentage declines for both contracts since Jan. 4.
• More pressure came from a contraction in China’s exports and imports in January and
February, including crude oil imports, despite a lifting of COVID-19 restrictions.

FX Market (The dollar hit a three-month high)

• The dollar hit a three-month high against a basket of currencies yesterday after Federal
Reserve Chair Jerome Powell said the US central bank is likely to raise rates more than
previously expected and warned that the process of getting inflation back to 2% has a
long way to go.
• The dollar index has hit highs not seen since January. The index, which measures the
dollar against a basket of currencies, hit a high of 105.43 during yesterday’s session.
That’s the highest the index has reached since Jan. 6, when it notched 105.631.
• THB was back to depreciated again to Bt35.08 from Bt34.45 per dollar on the previous
session as strengthening of US$. THB had been depreciated from its lowest level at
Bt31.72 on 24 Jan. We believe that THB has strong support from strong economic
recovery from foreign tourists and positive current account. Thus, we still maintain THB
to closed at Bt33.5 per dollar at the end of this year.

Gold Market (Prices drop on rate hike fear)

• Gold prices fell more than 1% yesterday, as the dollar jumped after Federal Reserve
Chair Jerome Powell indicated rate hikes could come at a faster pace from the US
central bank in his testimony to a congressional committee. Spot gold was last down
1.77% at US$1,814.21 per ounce. US gold futures fell 1.9% to settle at US$1,817.70 per
ounce.

March 8, 2023 6
Analyst: Kavee Chukitkasem
 • The US jobs report for February is due on Friday. If Friday’s jobs data shows significant
resilience in the US labor market, it would pave the way for even higher US rates and
could unwind the month-to-date gains garnered so far by gold. Despite being known as
an inflation hedge, higher interest rates dent bullion’s appeal as they increase the
opportunity cost of holding a zero-yield asset.

Other (VIX moved up)

• VIX index was up to 19.59 yesterday from 18.61 on previous session after Fed Chairman
raise concern on more rate hike. The index moved sideways for the last 3 months which
may indicated that investors are still unsure about the market direction. However, we
do not expect to see much upside for US stock market from lower VIX index as current
level is close to its lowest level in one year at 17.36. Investors look too much optimistic
about market direction.

Thai News (Thai inflation lower than expectation)

• The Commerce Ministry yesterday reported headline inflation, gauged by the consumer
price index (CPI), rose by 3.79% YoY in February, decelerating for the second straight
month, and was the lowest rate in 13 months, following a 5.02% YoY rise in January, and
5.89% year-on-year growth in December 2022. Core inflation, which excludes raw food
and energy prices, rose by 1.93% from February last year, decelerating from a 3.04% rise
in January and 3.23% growth in December. In February 2023, the country's inflation rate
was the 29th lowest out of 139 economies.
• PTTEP was awarded exploration and production licenses at two of three new petroleum
blocks in the Gulf of Thailand, a move that should pave the way for more domestic oil
and gas supply to strengthen the country’s energy security.

Thanks,
Kavee C.
Pi Securities

March 8, 2023 7
Analyst: Kavee Chukitkasem
Summary Market Data (8 March 2023)
Change 5 2 Week
Equit y Index Last 1D 1W 1M 6M 12 M YTD High Low
Thailand
SET 1,618.51 0.72% - 0.24% - 4.14% - 1.31% - 1.22% - 3.01% 1,708.89 1,517.51
SET50 967.02 0.64% 0.15% - 3.70% - 2.26% - 2.31% - 3.80% 1,027.07 929.92
SETHD 1,164.22 0.78% - 0.26% - 3.18% - 0.60% - 2.92% - 2.98% 1,222.06 1,108.52
Bank 383.54 0.37% 0.01% - 2.32% 1.12% - 7.00% - 1.23% 435.89 341.08
Energy 22,863.12 0.92% - 0.69% - 6.18% - 11.08% - 8.18% - 8.96% 25,962.18 22,609.36
Commerce 37,380.55 0.94% 0.04% - 4.73% 3.42% - 4.38% - 4.49% 40,897.97 32,629.95
ICT 167.14 0.21% - 0.38% - 1.33% - 2.53% - 16.35% 0.94% 224.29 157.93
Elect ronic 12,120.60 1.98% 7.81% 1.83% 61.41% 129.12% 16.81% 12,370.18 4,560.59
Hospit ilit y 7,079.60 0.94% 0.30% - 4.88% - 3.68% 17.48% - 1.74% 7,790.78 5,971.87
Con. Mat . 8,986.52 2.12% 1.61% - 2.71% - 4.13% - 8.13% - 2.89% 9,945.55 8,473.76
Propert y 262.63 0.66% - 1.67% - 4.30% 4.27% 9.68% - 3.54% 275.91 224.81
Transport 353.23 - 0.33% - 2.74% - 5.58% - 2.81% 5.98% - 5.87% 382.08 326.53
Food&Bev 12,491.10 0.67% - 1.89% - 2.29% - 4.66% - 2.46% - 1.82% 13,519.88 11,938.37
USA
Don J ones 32,856.46 - 1.72% 0.61% - 3.15% 4.04% 1.87% - 0.88% 35,492.22 28,660.94
Nasdaq 11,530.33 - 1.25% 0.65% - 3.97% - 2.22% - 9.00% 10.16% 14,646.90 10,088.83
S&P50 0 3,986.37 - 1.53% 0.41% - 3.63% 0.16% - 3.63% 3.83% 4,637.30 3,491.58
DJ Financial 745.18 - 2.35% - 1.45% - 5.09% 2.22% - 0.99% 3.04% 856.72 631.24
DJ Healt hcare 1,354.69 - 1.57% - 0.08% - 4.39% - 0.10% - 1.43% - 6.10% 1,537.35 1,259.23
DJ Technology 3,514.43 - 1.14% 2.17% - 2.78% 1.68% - 8.06% 13.47% 4,432.24 2,913.39
DJ Energy 709.49 - 1.66% 2.42% - 0.74% 8.15% 14.64% - 2.55% 788.55 544.85
DJ Consumer goods 821.66 - 1.44% - 1.48% - 2.60% - 7.52% - 7.84% 4.45% 1,020.80 761.12
DJ Consumer service 1,209.78 - 0.98% - 0.50% - 6.17% - 4.19% - 10.05% 6.68% 1,539.96 1,088.44
DJ Propert y 1,275.91 - 1.22% - 1.13% 0.34% 9.27% 14.76% 1.22% 1,320.97 1,072.29
DJ Con. Mat . 1,186.11 - 1.06% 1.24% - 1.54% 6.41% 6.70% 7.90% 1,237.42 938.42
DJ Transport at ion 14,786.56 - 1.25% 0.43% - 4.71% 7.63% 1.22% 10.41% 16,728.57 11,946.21
VIX Index 19.59 5.27% - 5.36% 6.87% - 20.50% - 48.94% - 9.60% 37.52 17.06
EURO
STOXX 60 0 460.60 - 0.77% - 0.11% - 0.04% 11.79% 11.28% 8.40% 467.86 379.72
DAX 15,559.53 - 0.60% 1.27% 0.54% 20.47% 21.96% 11.75% 15,706.37 11,862.84
FTSE 10 0 7,919.48 - 0.13% 0.55% 0.22% 9.42% 13.94% 6.28% 8,047.06 6,707.62
ASIA
Shanghai 3,285.10 - 1.11% 0.17% 0.66% 1.20% - 1.51% 6.34% 3,424.84 2,863.65
Hang Seng 20,534.48 - 0.33% 3.78% - 5.20% 7.82% - 2.16% 3.81% 22,700.85 14,597.31
CSI3 0 0 4,048.85 - 1.46% - 0.51% - 2.24% - 0.15% - 5.60% 4.58% 4,530.33 3,495.95
SENSEX 60,224.46 0.00% 2.14% - 1.01% 2.03% 13.97% - 1.01% 63,583.07 50,921.22
NIKKEI225 28,309.16 0.25% 3.15% 2.91% 3.20% 11.96% 8.49% 29,222.77 24,681.74
KSOPI 2,463.35 0.03% 2.09% - 0.69% 3.66% - 7.12% 10.15% 2,769.18 2,134.77
TWSE 15,857.89 0.60% 2.28% 1.64% 10.05% - 8.24% 12.17% 17,770.07 12,629.48
ASX20 0 7,364.65 0.49% 1.46% - 2.56% 9.44% 4.12% 4.63% 7,624.80 6,407.00
Phillippines 6,705.12 0.51% 2.27% - 4.59% 2.30% - 8.47% 2.11% 7,203.47 5,699.30
Malaysia 1,458.67 0.41% 0.31% - 2.13% - 2.19% - 7.62% - 2.46% 1,615.17 1,372.57
Indonesia 6,766.76 - 0.59% - 1.12% - 2.10% - 5.84% - 0.90% - 1.22% 7,377.50 6,509.88
Singapore 3,245.27 0.18% - 0.53% - 4.11% 1.07% 1.62% - 0.19% 3,456.09 2,968.87
Viet nam 1,037.84 1.04% 1.28% - 3.65% - 16.52% - 31.48% 3.05% 1,530.95 873.78

March 8, 2023 8
Analyst: Kavee Chukitkasem
 Change 5 2 Week
Commodit y Last 1D 1W 1M 6M 12 M YTD High Low
Hard Commodit y
Gold ($ / Oz) 1,813.45 - 1.81% - 0.74% - 2.76% 5.53% - 7.57% - 0.58% 2,059.16 1,614.96
Thai Gold (Baht ) 30,200.00 - 0.17% 0.00% 1.17% 3.25% - 0.49% 0.67% 31,700.00 29,100.00
Silver ($ / Oz) 20.08 - 4.64% - 3.99% - 10.19% 8.73% - 17.96% - 16.19% 26.77 17.56
Aluminium ($ / MT) 2,306.00 - 1.43% - 1.33% - 9.14% 3.55% - 37.33% - 1.85% 3,885.75 2,080.00
Copper ($ / lb) 398.65 - 2.78% - 2.71% - 1.73% 15.95% - 13.16% 4.62% 491.90 315.00
St eel ($ / T) 1,050.00 - 0.94% - 0.38% 31.74% 31.25% - 1.85% 41.13% 1,570.00 645.00
Zinc ($ / MT) 2,964.75 - 2.61% - 1.62% - 8.99% - 5.97% - 26.33% - 0.85% 4,536.00 2,678.85
Lit hium ($ / MT) 72,630.43 0.00% - 4.62% - 5.37% - 5.54% 9.90% - 14.28% 85,000.00 66,090.00
Soft Commodit y
Wheat ($ / bu.) 684.75 0.33% - 0.98% - 9.51% - 17.15% - 52.11% - 13.54% 1,319.25 684.75
Rubber ($ / kg) 139.10 - 0.14% 2.13% - 1.07% 7.50% - 21.65% 6.84% 181.20 115.00
Soybean ($ / bu) 1,525.25 - 1.02% 2.33% - 0.44% 3.99% - 7.96% 0.39% 1,784.00 1,350.00
Soybean Meal ($ / T) 501.50 - 1.26% 2.85% 1.01% 15.00% 8.55% 4.81% 531.20 397.10
Sugar ($ / lb) 21.02 0.72% - 4.80% - 1.04% 16.45% 8.30% 4.89% 22.36 17.20
Corn ($ / bu) 642.00 - 0.39% 1.99% - 5.24% - 5.13% - 13.98% - 5.38% 827.00 561.50
Crude Palm Oil (MYR/ MT) 4,199.00 - 1.20% 2.09% 12.72% 16.64% - 41.18% 0.67% 7,817.00 3,143.00
Energy
WTI ($ / bbl) 77.58 - 3.58% 0.69% 5.71% - 5.32% - 32.61% - 3.34% 129.44 70.08
Brent ($ / bbl) 83.29 - 3.35% - 0.72% 4.19% - 5.35% - 30.05% - 3.05% 133.15 75.11
Newcast le Coal ($ / MT) 179.25 - 1.38% - 7.05% - 24.05% - 59.17% - 57.00% - 55.65% 440.00 180.00
Nat ural Gas ($ / MMBt u) 2.69 4.47% - 2.18% 11.49% - 65.74% - 46.78% - 39.96% 10.03 1.97
BDI 1,258.00 0.00% 27.07% 102.58% 12.93% - 43.71% - 16.96% 3,369.00 530.00
Cont ainer Freight 1,859.28 0.00% - 2.03% - 8.58% - 67.16% - 79.96% - 12.30% 9,179.98 1,859.28
Supramax Freight 1,180.00 0.00% 6.79% 73.02% - 20.65% - 55.30% 11.11% 3,033.00 625.00
Handysize Freight 594.00 0.00% 10.82% 36.24% - 30.85% - 59.51% - 10.41% 1,787.00 431.00
Bond Market (%)
Thai 2 - yrs Yield 1.85 1.87 1.86 1.73 1.61 0.55 1.63 2.01 0.52
Thai 10 - yrs Yield 2.55 2.61 2.59 2.47 2.66 2.07 2.64 3.30 2.13
Thai 2- 10 Spread 0.70 0.74 0.72 0.73 1.05 1.53 1.01 1.80 0.68
US 2 - yrs Yield 5.01 4.89 4.82 4.29 3.43 1.55 4.43 5.04 1.55
US 10 - yrs Yield 3.96 3.96 3.92 3.52 3.26 1.77 3.87 4.34 1.76
US 2- 10 Spread - 1.04 - 0.93 - 0.90 - 0.76 - 0.17 0.22 - 0.55 0.44 - 1.05
Fx Market
Dollar Index 105.62 1.21% 0.71% 2.62% - 3.85% 5.09% 2.02% 114.78 97.69
USD/ THB 35.09 1.70% - 0.38% 4.96% - 3.66% 4.54% 1.40% 38.46 32.57
EURO/ THB 37.02 0.45% - 0.60% 2.55% 1.58% 2.88% - 0.10% 38.14 35.40
POUND/ THB 41.50 - 0.01% - 1.96% 3.02% - 1.22% - 4.09% - 0.87% 44.73 39.09
Yen/ THB 25.59 0.79% - 1.00% 0.38% 0.98% - 11.29% - 2.83% 28.72 25.03
Yuan/ THB 5.04 1.20% - 0.78% 2.25% - 4.17% - 4.57% 0.58% 5.46 4.79
USD/ EURO 0.95 1.24% 0.24% 2.32% - 5.15% 1.63% 1.48% 1.05 0.89
USD/ POUND 0.85 1.65% 1.62% 1.90% - 2.51% 8.98% 2.14% 0.97 0.75
USD/ Yen 137.16 0.90% 0.73% 4.55% - 4.58% 17.87% 4.61% 151.95 115.56
USD/ Yuan 6.97 0.50% 0.44% 2.47% 0.01% 9.66% 0.98% 7.33 6.31

Source: Bloomberg

March 8, 2023 9
Analyst: Kavee Chukitkasem