Market today

The SET is expected to benefit from the surge in the DJIA, hopes the Fed will cut rates and the merger of GULF and INTUCH. However, most positives are already in the market, limiting the upper bound with resistance between 1330-1335; supports at 1315 and 1310.

Today’s highlights

• US retail sales in June increased 2.3%YoY and were stable MoM, higher than market expectations, suggesting consumer spending (70% of the US economy) is still recovering, despite the Fed's tight monetary policy.
• The IMF forecasts global GDP growth this year at 3.2%, unchanged from April's projection. However, it has lowered the US GDP growth forecast for this year to 2.6% from 2.7%.
• REIC reports the standard house construction cost index for 2Q24 rose 1.2%QoQ and 3.8%YoY, showing that standard home construction costs continue to rise, albeit at a slower pace this quarter.
• The cabinet approved a joint investment contract for the Orange Line electric train (Bang Khun Non-Min Buri) with BEM (BEM in partnership with CK). The total investment is Bt140bn. The contract signing is scheduled for July 18, with fares set at Bt15-44 for the first 10 years.
• News of the murder of six foreigners at the Grand Hyatt Erawan Hotel is expected to damage the tourism industry and ERW in the short term. However, the impact should be less severe than previous troubles due to its more limited scope.
• GULF and INTUCH announced a merger to maximize benefits in both energy and telecommunications businesses. They plan to establish a new company, NewCo, in 2Q25. This is viewed positively for both GULF and INTUCH, as NewCo will have more management flexibility and easier intra-group synergy.

Strategy today

In the short term, the SET is still fragile and has limited upside due to prolonged political uncertainty and continued uncertainty over the digital wallet; some support is expected from external factors, including 2Q24 results of US companies, which are expected to be strong despite a slowing US economy, weak China economy and ECB stance of keeping interest rate unchanged. Our strategy is “Selective Buy”.

Trading today

The Thai capital market still has limited upside and is waiting for clearer external factors. We recommend "Selective Buy" with four main themes:
1) Stocks whose 2Q24 profit is expected to grow YoY and QoQ and whose valuations are attractive - MINT, BEM, OSP, TU, KCE and CPF.
2) Stocks expected to benefit from short covering after the uptick rule started on July 1, also with strong fundamentals with SETESG Ratings between AAA and A - HANA, TOP, BEM, MINT, OSP, BBL, SCGP and AOT.
3) Stocks expected to benefit from the adjustment of ThaiESG conditions that will raise the maximum tax reduction to Bt300,000 and reduce the holding period to 5 years - ADVANC, CPALL, BDMS, BBL and GULF.
4) Brent price has recovered as there continues to be attacks on cargo ships in the Red Sea and attacks on energy infrastructure in Russia, although the Middle East conflicts remain fairly contained. We expect the price to be at US$80-90/bbl. Oil stocks are good as a hedge against risk. For high-risk takers, we recommend an upstream oil stock - PTTEP.

Daily top picks

KTB: 2Q24 profit is expected to be Bt10.8bn, growing 7%YoY off higher NIM and non-NII; valuation is valuation, dividend yield is high and asset quality risk is low. Profit is expected to continue to grow, backed by decreasing credit cost; there is upside on NIM from the possibility of no change in interest rate) and a chance it may bump up its dividend.
BDMS: 2Q24 core profit is expected to grow YoY but decline QoQ due to seasonal factors, while 2024 core profit is expected to grow 13% to Bt16bn. Profit is expected to be stronger in 2H24. Currently, the stock is trading at 2024F PER of 26x, below -2SD of historical average and lower than regional average of 28x.

Today’s reports

Petrochemicals – Product spread widens on cheaper naphtha

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