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Investors fret about recession but Fed may engineer soft landing, Thai market players say

A panellist said that if the Fed could keep rates unchanged in the second quarter, the markets could stage a rally in the fourth quarter
By Goh Thean Eu   
December 6, 2022

Investors are worried about a global recession but the US Federal Reserve is likely to engineer a soft landing, according to some investment experts in Thailand.

They shared their views at a panel session during Asia Asset Management’s recent 13th Annual Thailand Roundtable in Bangkok.

The Fed has raised interest rates six consecutive times this year, including four 75 basis point hikes, to rein in inflation, and has served notice that it isn’t done yet. There are growing concerns that higher borrowing costs may drive the economy into a recession.

The central bank signalled in November that future increases will be slower. Its last rate decision for the year is on December 14.

“I believe the Fed has all the tools for a soft landing. The interest rate is now at 3.75%-4.00% so there’s room for manoeuvring if they want to engineer a soft landing,” said Triphon Phumiwasana, head of private banking at K Bank Group. “The engineered recession will be just enough for the workers to feel the pain, but not enough for them to ask for a pay increase.”

Fellow panellist Win Phromphaet, executive vice president of the high-net-worth division at Bank of Ayudhya, believes markets could stage a rally in the fourth quarter of 2023 if the Fed keeps rates unchanged in the second quarter.

He said Asian equity and bond markets could have a “good year” in 2023, drawing a parallel to what happened during and after the global financial crisis.

“In 2008, almost all asset classes fell but in 2009, the markets recovered. In 2018, the equities and fixed income markets fell, but they recovered in 2019. So, with the Fed rate becoming more certain now, we are optimistic that next year will be a good year,” he said.

Stock market valuations have become attractive after the declines this year, according to Chatree Rojana-arpa, senior executive vice president for strategy and product development at DAOL Securities.

“Currently, we are in the storm, but once the storm has passed, there will be golden sky. We see the current stock market [as] having attractive valuation, especially if you are investing for the long term,” he said.

The roundtable on November 24 was sponsored by Japan’s Sumitomo Mitsui Trust Asset Management and DAOL Securities.