Sawasdee – July 13, 2023

Market today

The SET is expected to fluctuate as investors are following situations both inside and outside Parliament, scheduled to vote for PM at 5pm today, with the outcome expected after market close. Fluctuation is expected to be range-bound with the upper bound at 1,510-1,520 and the lower bound at 1,479. A fall below this would be a negative indicator, with next support at 1,465.

Today’s highlights

• Today watch the vote for Prime Minister in Parliament. The ETC has asked the Constitutional Court to rule on Mr. Pita’s qualifications in view of his holding of ITV shares and has proposed disqualifying him as a MP. The court also accepted a petition to use the revised Article 112 against the election campaign and gave 15 days to resolve allegations.

• Truck operators said that if the government does not continue to freeze diesel price, transportation cost must be raised by 10%, which will raise prices across the board.

• US CPI in June grew 3.0%YoY, lower than expected and at a two-year low, while US core CPI in June grew 4.8%YoY, also lower than expected, leading the market to expect the Fed to stop its upward interest rate cycle soon.

• The Beige Book says overall US economic activities have increased slightly since the end of May but though continued growth is forecast, it will be at a slower rate.

• EIA reported an increase of 5.9mnbbl in crude oil inventory last week, opposite the expectation of a 1.0mnbbl decrease.

• Hong Kong will suspend importing seafood from 10 provinces in Japan including Tokyo after Japan says it will release water contaminated with radiation from the nuclear power plant in Fukushima into the Pacific. This is sentimentally negative for TU.

• Elon Musk announced the establishment of a new company, xAI, focusing on developing AI.

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 being 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 that pulls 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

TISCO: 2Q23 profit is announced at Bt1.85bn (+3%QoQ and stable YoY) as expected. Today we upgrade our rating to “Outperform” as dividend return is at an interesting level at 8.2% and the stock price has fallen by 7%YTD.
GULF: In the short term it benefits from a fall in bond yield. 2H23 core profit is expected to grow YoY and HoH from new generation capacity from IPPs (1,325 MW) which will COD in March and October 2023, and profit share from a natural gas power plant in US that it began to book in March 2023.

Today’s reports

Residential Property – Time to put the sector on the radar
IVL – Preview 2Q23F: Lull in profit expected
TISCO – 2Q23: Decent results; Upgrade