Sawasdee – July 14, 2023

Market today

Politics remains uncertain, waiting for the second round of voting for PM next Wednesday. On a technical basis, the SET is expected to move between 1,479-1,520, waiting to break out and provide a clear direction. Break through 1,520 would be a good signal, with next resistance of 1,534. If it falls to 1,479, indicators are negative with the next support at 1,465.

Today’s highlights

• In the first round of votes for PM vote yesterday, Mr. Pita did not get enough votes (i.e. over 376) and the second round will be held on Jul 19.

• UTCC reported an increase in the Consumer Confidence Index in Jun to a 40-month high, supported by an improved economy and clear recovery in tourism. However, the market remains concerned over the uncertainty of the formation of a new government and political stability.

• OFFO plans to freeze diesel price at a maximum of Bt32/litre from Jul 21 by using a Bt55bn loan to cover and reducing the funds collected on diesel for the Oil Fund as the Ministry of Finance does not want to extend the cut on diesel tax, set to expire next week.

• US PPI in Jun was 0.1%YoY, lower than expected and at a 3-year low; core PPI in Jun was 2.4%YoY. US initial jobless claims last week declined more than expected.

• FedWatch Tool sees 92.4% probability the Fed will raise interest rate 25bps to 5.25-5.50% and 7.6% probability the Fed will leave rate unchanged at the FOMC meeting on Jul 25-26. At the meeting on Jul 30-31, 2024, the probability of a 25bps cut in the rate is 42.2%.

• IEA cut world oil demand forecast for the first time in 2023 in response to a worsened economic outlook, especially in wealthy countries.

• Amazon reported Prime Day sales grew by 6.1%YoY, a record high.

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. 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 – BBL, ADVANC, 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 suggest that 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 avoid 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) Tourism stocks which may be negatively affected by the lack of clarity in the formation of a government.

Daily Focus

PTTEP: In the short term the company benefits from higher oil price. 2Q23 profit is expected at Bt19.4bn, stable QoQ but down YoY, as oil and gas prices fell and sales volumes of both fell slightly. Dividend yield in 2023 is expected to be 4-5%.
KCE: Profit is expected to bottom in 1H23 and then grow in 2H23 on higher capacity and lower costs, especially for copper and electricity. The stock price has already fallen to incorporate most of the negatived and is trading at PER -1SD.

Today’s reports

CPF – Preview 2Q23F: Losses to continue