Sawasdee – July 27, 2023

Market today

The Fed raised interest rate as expected, but did not signal a reduction in rate this year, as a decision will be based on economic data. Local politics remains problematic, keeping the SET range-bound at 1,517-1,535 to wait for some light in the tunnel. Technically, the index is waiting to break out to a better direction with next resistance of 1,545 and support at 1,510.

Today’s highlights

• The Constitutional Court scheduled a meeting on Aug 3 to consider whether to accept the petition from the ombudsman questioning if a submission of Mr. Pita’s name for PM again is against the constitution or not.

• The Ministry of Finance forecasts 2024 GDP growth of 3.5% (3.0-4.0% range) after 2.6% growth in 2023, supported by steady growth in tourism and domestic demand.

• The Ministry of Commerce reported a contraction of 6.4% YoY in exports and 10.3% YoY in imports in Jun putting the trade account into a surplus of US$57.7mn. This is expected to grow in July on appreciation of the baht and the food crisis, which is positive to agricultural products. It targets 1-2% growth in 2023 exports.

• At the FOMC meeting, interest rate was raised by 25bps to 5.25-5.50% as expected. However, the Fed did not signal a cut in the rate as a decision will be made based on economic data. It is not expected to lower the rate this year.

• US new home sales in Jun declined by 2.5% to 697,000 units, lower than the expected 725,000 units and down from 715,000 units in May, affected by higher home prices and mortgage rates.

• EIA reported a decline in US crude oil stock last week of 0.6mn bbl, far less than the 2.3mn bbl decline expected.

• eBay’s 2Q23 net income beat expectations though on lower revenue than expected. Meta’s 2Q23 revenue and net income both beat expectations.

Strategy today

In the short term the SET is still waiting for the formation of a new government, while external factors related to the world economy are starting to relax to some extent. Watch the FOMC, ECB and BoJ monetary policy meetings this week. The Fed raised rate 25bps as expected, but gave no hints as to future direction, saying it depended on economic data. We recommend “Selective Buy”.

Trading today

Weekly portfolio: The SET is pressured by domestic factors, with some easing in external factors. We recommend “selective buy” in themes with positive drivers:
1) Stocks whose 2Q23 operating results are expecting to continue growing YoY and QoQ – BBL, ADVANC, BEM and GULF.
2) Speculative stocks whose 2Q23 operating results are likely to beat market expectations – SCGP.
3) For investors who can handle risk, speculate on stocks based on a shift in the political scene– CPAXT, BJC, TNP, AMATA, OSP, HTC, KCE and HANA.
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

IVL: The company benefits from a recent increase in cotton price – a substitute for PET textiles - to the highest since Oct 2022. 2Q23 profit is expected to be stable QoQ, but 2H23 profit will improve on higher sales volume from restocking.
HANA: Although 2Q23 results are expected to weaken, it is likely to recover in 2H23 from more stable electronics demand. The stock has been lagging its sector.

Today’s reports

Energy – Oil refinery: weak 2Q23F profit expected
SCC – 2Q23: Beat forecasts on one-time gain