Sawasdee – July 18, 2023

Market today

The SET is seen to have limited short-term upside at resistances of 1,534 and 1,550, as short-term technical indicator suggests it is overbought, and there may be risk-averse selling before the second round of voting for PM tomorrow. Support is at 1,518. If it falls below that, a resting signal will be clearer with next support at 1,506.

Today’s highlights

• Russia did not extend the grain export deal via the Black Sea after it ended on Jul 17, saying western countries are preventing Russian agricultural products from reaching the world market.

• 2Q23 China GDP grew by 6.3%YoY, lower than the expected 7.3%YoY, while employment rate of those aged 16-24 in Jun increased to 21.3%, a record high. The US Treasury Secretary said the slowdown of the Chinese economy is at risk of spreading to other countries, but he still believes the US economy will not go into recession.

• The Thai Real Estate Association plans to propose the government set up a fund to help purchasing power to pull in the middle to low income groups, increase business efficiency and expand businesses to cover all groups.

• The Royal Irrigation Department said Thailand is mildly affected by El Nino and has plans to handle a drought, adjusting estimated water level in large dams across the country after less water flow into the dams to keep enough water to last until the 2024 rainy season.

• TAT expects to generate Bt3.0tn in revenue from tourism in 2024. It expects 35mn foreign tourists, generating Bt1.92tn, with 200mn domestic travelers generating Bt1.08tn.

• The private sector has asked the government to continue to freeze diesel price after the Ministry of Finance said it will allow the diesel tax cut to expire on Jul 21, on fears production costs will rise.

• TCCT has unanimously resolved to allow BCP to acquire ESSO, with conditions. BCP has 30 days to consider the conditions and if accepts the conditions, the deal is expected to conclude by the end of the year.

Strategy today

In the short term the SET will continue pressured by politics, as there is still no new government. Concerns from external factors – a slowdown in the global economy and monetary policy - have begun to ease to some extent. We recommend “Selective Buy”.

Trading today

Weekly portfolio: Investors are waiting for clarity on politics, affecting the SET. We recommend “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 investors who can handle risk, recommend speculate in stocks in case the political scene shifts – GULF, GPSC, CPALL, SIRI and SC.
4) A fall in the SET to 1,450 is seen as an opportunity to buy stocks whose prices have fallen deeply and have been trading at PER and PBV of below -1SD – CRC, SCGP and OR.
In the short term we recommend avoid investment in: 1) Food (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 that may be negatively affected by politics.

Daily Focus

BBL: 2Q23 profit is expected to grow 56%YoY and 8%QoQ, the strongest in the bank sector, on lower provisions and higher NIM. It is also positioned to benefit the most from an upward interest cycle and has lower quality asset risk than other banks.
LH: 2Q23 profit is expected to recover QoQ and presales will start to recover in 2H23, backed by new launches. Of a targeted Bt35bn in new projects (+8%YoY), over 80% will open in 2H23. It also has possible upside from the planned sale of two hotel assets to LHHOTEL in 4Q23.

Today’s reports

AH – Preview 2Q23: Up YoY despite lower equity income
CBG – Preview 2Q23: Recovering QoQ