Limited recovery, still has downside
The market lacks a new catalyst and investors are expected to sell to avoid risk ahead of the Nov 5 US election; the weak baht hampers fund flow, limiting SET upside at resistance of 1475-1485; there is still downside risk with supports at 1450 and 1440.
Highlights
- FTI reports vehicle production in September 2024 at 122,277 units, down 25.48%YoY, with export production declining 15.78%YoY to 87,666 units and domestic production falling 42.31%YoY to 34,611 units. The FTI is preparing to revise down its 2024 production target from 1.7mn units.
- IMF warns that intensifying trade and tariff tensions between US, EU and China will have widespread global impact, hurting all parties through lower productivity and inflationary pressures.
- Bloomberg reports analysts expect the BoJ to keep its interest rate at 0.25% at its October 30-31 monetary policy meeting, with small likelihood of policy signals as it monitors the upcoming US presidential election on November 5.
- The Minister of Energy opposes the ERC’s 3,600MW Phase 2 green energy bidding criteria, citing risk of perceived favoritism. A letter of objection has been sent, with the resolution process expected to take about one month.
- US new home sales in September rose 4.1%MoM to 738,000 units, the highest since May 2023 and above market expectations. Initial jobless claims for previous week decreased by 15,000 to 227,000 claims, below market forecasts.
- Boeing shares declined 1.18% yesterday after mechanics rejected a new contract offering a 35% wage increase over four years and extended the strike. IBM shares fell 6.17% after reporting an earnings miss.
Strategy today
In the short term the SET is expected to move sideways. The index rose to 1500 after the MPC cut interest rate, and the market is expected to have a steady push from US earnings releases, which are expected to be stronger than expected due to low expectations. However, upside is limited as we enter 3Q24 earnings season, while the market is waiting for additional stimulus. Next week economic figures to be reported are US real estate and manufacturing PMI which are expected to slow down. Our strategy is “selective buy”.
Trading today
SET upside is limited for the short term as we enter the 3Q24 earnings season and as the market waits for a new catalyst. We recommend “Selective Buy” with four main themes:
- Earnings plays: stocks with strong fundamentals and strong 3Q24 profit – BEM, BCH, BDMS, GULF, TRUE, AU and TNP. Be cautious on sectors that are likely to come in below expectations – Energy, Petrochemicals, Packaging and Electronics.
- For risk takers who want to speculate after the MPC cut interest rate, we recommend LHHOTEL, DIF, CPALL, AP, SIRI and SPALI, which is expected to benefit from a new loan measure of Bt3mn per person, TISCO and KKP who have large leasing portfolios, and GPSC and BAM, who benefit from lower financial costs.
- Stocks with high dividend yield and expected to be targets of Vayupak and tax-deductible funds; recommend stocks with profit expected to grow in 2025 – KTB, BBL, ADVANC, HMPRO and BCP.
- For investors who are concerned about tension in the Middle East and want oil stocks to hedge the risk, we recommend an upstream oil stock – PTTEP.
Daily top picks
AMATA: Land sales in 2024 are expected to reach all-time high at not lower than 2,500 rai, growing 35%YoY. 3Q24 net profit is expected to be Bt812mn, shooting up 105.2%YoY and 251.4%QoQ. Growth is expected to continue YoY and QoQ in 4Q24, bringing 2024F net profit to Bt2,399mn, 27.3% growth. Recommend to buy for trading at not higher than Bt27/share.
MINT: Although an unrealized FX loss will pressure 3Q24 profit down 85%YoY, core profit is expected to be strong, growing 18%YoY to Bt2.7bn, supported by growth in the hotel business and higher EBITDA margin. Risk/reward is attractive as the stock price has fallen by 4% in last month, to trade at 2025F PER of 24x (-1SD).
