Sawasdee – July 10, 2023

Market today

The SET is expected to fluctuate, dominated by politics with a key event being the vote for PM on July 13. The following point is at around 1,479. A fall below this is a negative signal, with next support at 1,465. Upper bounds are limited at 1,500 and 1,520. If the SET can break through this, indicators are positive.

Today’s highlights

• Today the ETC will consider the issue of Mr. Pita’s holding of ITV stock after the committee finishes summarising the case. This is expected to be sent to the constitutional court and affect the vote for PM on July 13.

• The swine raiser association of Thailand said the smuggling of pork has widened after the spread of ASF, causing domestic pork price to fall and causing ~Bt50bn damage to the economy.

• The Excise Department plans to cancel the diesel tax cut as the government has lost revenue of Bt158bn. It is suggesting the Ministry of Energy use the Oil Fund mechanism instead. New tax packages will be presented to the new government, such as saltiness and e-cigarette taxes.

• The Ministry of Finance estimates a 6-month delay in the FY2024 budget, which will cut Bt140bn off 4Q23-1Q24 investment, with 0.05% sliced off of 2023 GDP. It estimates FY2024 disbursement will be close to estimates.

• US Treasury Secretary said tax collected on imported Chinese goods affects consumers and it is too early to say with certainty that the US economy will not enter recession.

• China fined Ant Group Bt35bn and Tencent Bt15bn for violating financial laws, signalling that inspection of Chinese tech firms is nearly ended, paving the way to growth.

• Large-sized commercial banks in China cut US dollar-deposit interest rate for the second time in one month, while the authorities cut US dollar-deposit interest rate from 4.3% to 2.8% to stop the dollar advantage and support the yuan.

• Early on Jul 7, there was an explosion and a fire on a Pemex drilling and gas distribution platform owned by Mexico, located in the southern part of the Gulf of Mexico, with a total capacity of 0.17mn bbl/day.

Strategy today

In the short term the SET will be pressured by the Fed’s Beige Book which expects slowed US economic activities and overly slow declines in US and UK inflation. At home keep an eye on the vote for the PM on July 13, 2023. We recommend “Defensive and Selective Buy”.

Trading today

Weekly portfolio: The SET is seen to be pressured by politics and a slowed world economy. We recommend “defensive and selective buy” in themes with positive drivers:
1) Stocks whose 2Q23 profit is expected to grow YoY – AOT, BBL, ADVANC, MINT, OSP, BDMS and BEM.
2) Stocks with strong fundamentals that are seen as having high dividend potential with 2023 dividend yield of over 5% - TISCO, LH and AP.
3) For those who can handle risk, we recommend if the SET falls to around 1,450 speculate in stocks expected to recover after a steep fall in price and pull PER and PBV below -1S.D. – CRC, GULF and SCGP.
In the short term we recommend avoiding investment in: 1) Food sector (TU CPF GFPT and BTG) which is seen by the market as likely to be downgraded as 2Q23 profit is expected to weaken QoQ and YoY; 2) stocks expected to be affected by El Nino in Commerce (GLOBAL), Finance (MTC, SAWAD), Automotive (SAT, STANLY), Beverages (CBG, where sugar plays a leading role in cost), hydropower (CKP) and Food & Agriculture (CPF and GFPT) and; 3) Technology (DELTA, HANA and KCE) due to the conflict between China and the US and expected slow recovery in 2Q23 profit.

Daily Focus

PTT: The stock price is less volatile than the market, rising 1.5% in 1H23 vs. the SET’s -10%. Despite continued worries over how the overall economy will affect oil consumption, dividend payout is consistent with yield of around 6%, underwritten by a strong financial position.
CPALL: 2Q23 core profit is expected to grow YoY from higher sales volume in CVS business and MAKRO, but will fall QoQ on seasonal factors. 2H23 profit is expected grow HoH on lower financial cost after finishing refinancing CPAXT’s debt at the end of April.

Today’s reports

ADVANC – Eased competition starting to bear fruit
CPALL – The sector’s best 2Q23F growth YoY
CPAXT – Preview 2Q23F: Improving, slow and steady