Limited recovery and still weak |
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Market today | Although the SET may see some technical rebound after yesterday’s plunge, overall signals are still negative and the conflict in the Middle East and the Fed’s interest rate direction are pressure points, limiting the upper bound to resistances of 1,375 and 1,383; supports are at 1,360 and 1,350. | Today’s highlights | • Iran’s Foreign Minister said Hamas is ready to release civilian hostages if Israel will release 6,000 Palestinians in custody.
• Preliminary US 3Q23 GDP grew by 4.9%, the largest expansion in the last two years and higher than the 4.7% expected; initial jobless claims last week increased by 210k, higher than expected.
• The ECB monetary meeting decided to keep interest rate unchanged for the first time since Jul 2022, after 10 consecutive rate hikes for a total of 4.5%.
• Amazon and Intel reported beats in 3Q23 operating results.
• ERC is gathering information to calculate Ft for the period of Jan-Apr 2024, where cost is expected to be Bt0.05-0.10/unit higher than the current period (Sep-Dec 2023) due to changes in oil price and exchange rate, both affected by geopolitics.
• The SET director and manager said yesterday that the plunge in the set of 2.17% was in line with regional markets, with most fund outflows being short-term investment, with no abnormal short-selling.
• The SET is opening a public hearing with regards to extending market hours to five hours per day, by closing the morning session 30 minutes later than now and opening the afternoon session 30mins earlier. It noted a study shows the Thai market has fewer opening hours than other markets.
• WHA signed a 250-rai land transaction with Shangan Auto Southeast Asia, which is setting up phase one of an EV plant worth Bt8.86bn to produce 100,000 units per year. | Strategy today | In the short term the SET is expected to able to recover and rebound, but upside is limited as the market is keeping an eye on the situation in the Middle East to see if the conflict will spread to Iran, as well as concerns over inflation and bond yields that may cause volatility. At home, keep an eye on whether the number of foreign tourists entering Thailand shows any deterioration after the shooting at the beginning of the month and for clarification of the digital wallet. Our strategy is selective buy. | Trading today | Weekly portfolio: This week the SET is expected to have some recovery or rebound, but the upside is limited as there are risks, both domestic and external. We recommend “selective buy” in themes with specific drivers:
1) Speculative stocks expected to benefit from oil price if it rises or stays at this already high level in view of concerns that tension in the Middle East will affect oil supply – BCP, PTTEP and TOP.
2) Undervalued stocks whose prices have fallen into the oversold zone, with strong fundamentals and inexpensive valuation (PER and PBV 2023F below 5-year average) – BDMS, CPALL, CPN and MINT.
3) Stocks whose profit is expected to be good through 4Q23 (+YoY and +QoQ) – AP, AOT, BLA, BCH, CENTEL and KCE, which has already passed bottom (+QoQ).
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: Commerce (GLOBAL), Finance (MTC, SAWAD), Automotive (SAT, STANLY), Food & Agriculture (CPF and GFPT) and Beverages (CBG has high sugar cost). | Daily top picks | SCGP: Profit is expected to pass bottom in 3Q23, then improve in 4Q23 QoQ as paper packaging price improves. The stock has fallen 38.4%YTD, far worse than the SET’s -18.2%YTD, already incorporating the negatives.
GULF: 2H23 core profit is expected to increase YoY and HoH, supported by the new IPP, GDP unit 2 (662.5MW), which will start to operate in October 2023, and profit share from Jackson Generation, which is expected to grow HoH from the loss of Bt349bn in 1H23 on low electricity price. | Today’s reports | BEM – Preview 3Q23: Driven by high traffic
SCC – 3Q23: Below forecasts on one-time loss |
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