Range-bound, waiting for the Fed chairman’s speech |
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Market today | The SET is expected to move between 1,400 and 1,420 as investors are waiting for the Fed chairman’s speech to ascertain interest rate direction. At a support of 1,407, if it can hang on at that point, the index is expected to recover to the upper bound at 1,420. A fall below that support indicates the index is likely to fall to 1,400. | Today’s highlights | • The EIA has lowered its forecast for Brent next year to US$93.24/bbl, a decrease of 1.8% from Oct. It also looks for a 1% slimming in gasoline consumption in the US next year, the lowest in 20 years.
• API reports a surge in US crude oil stock of 12mn bbl last week, vs the expected 0.3mn bbl decrease. The EIA postponed its report this week due to system upgrades and will report next week.
• The US reported a 2.5% increase in the number of mortgage loan applications last week, the first increase in a month, following a decrease in mortgage interest rates.
• IMF warns that a wage increase of over 20% in Eastern Europe could reduce the region's competitive potential and advises the ECB to keep interest rates at a high level until next year to reduce inflationary pressures.
• The Ministry of Finance is preparing to adjust the threshold for tax-free shopping to claim a VAT refund to reduce congestion at airports and stimulate spending; a proposal to the Cabinet is expected within two weeks.
• The Minister of Industry has ordered a followup on the progress of private companies holding concessions for potash mining, amid concerns about the environmental impact. A suggestion has been made to create new cities specifically to accommodate mining activities.
• IAA notes a 15% YTD drop in the Thai stock market, the sharpest drop in the world, due to lack of support from long-term investors. FETCO is preparing to ask the Prime Minister for discussion on setting up a long-term stock savings fund and extending the SSF, but with conditions similar to LTF and a shorter duration. | Strategy today | Although the SET is likely to continue recover as there is hope the Fed will stop its upward rate cycle, upside is still limited as there is no new catalyst to stimulate investment and at the same time there are risks from the tension in the Middle East and, at home, the release of 3Q23 earnings. Our strategy is selective buy. | Trading today | Weekly portfolio: Although the SET may recover, upside is still limited as there is no new catalyst, the situation in the Middle East needs to be monitored, and 3Q23 earnings are being released. We recommend “selective buy” in themes with specific drivers:
1) Big-cap stocks expected to recover in line with the market; we pick undervalued stocks whose prices have entered oversold territory and valuations are not stretched (PER and PBV 2023F are below 5-year average.) – BDMS, CPALL, CPN and MINT.
2) Stocks whose profit is expected to be good through 4Q23 (+YoY and +QoQ) – AP, AOT, BCH, CENTEL and KCE, which has already passed bottom (+QoQ).
3) Speculative stocks expected to benefit from oil price if it rises or stays at the current high level if tension in the Middle East does not escalate (oil price upside between US$5-10/bbl). Recommend trading when Brent is between US$84-94/bbl – BCP and PTTEP.
In the medium term we recommend being cautious on stocks that are expected to be affected by El Nino, which will erode purchasing power in the agricultural sector: Finance (MTC, SAWAD), Automotive (SAT, STANLY), Food & Agriculture (CPF GFPT and GFPT) and Beverages (CBG has high sugar cost). | Daily top picks | OR: 3Q23 profit is expected at Bt3.3bn, growing 21%QoQ on higher stock and FX gains; 4Q23 profit is expected to slip QoQ off the high stock gain in 3Q23, with seasonal improvement in sales volume.
CENTEL: 3Q23 profit is expected to grow YoY and QoQ from better operations of hotels and restaurants in Thailand. Profit is expected to continue to improve through 4Q23 and into 2024. In the short term, price is expected to be supported as it is expected to be placed in the MSCI index in the new round on Nov 14. | Today’s reports | AWC – 3Q23: Core profit below estimates
BCP – 3Q23: High operating profit, as expected
BJC – 3Q23: Misses market estimates
BLA – 3Q23: Poorer investment, better underwriting
CPAXT – 3Q23: Below estimates on gross margin
TOP – 3Q23: Surge in profit was in line |
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