• Several senior Fed officials support another interest rate cut this year to prevent further economic deterioration, though will stay cautious of an overly quick drop in inflation.
• The Minister of Labor said that raising the minimum wage to Bt400/day may not be implemented by October 1, after the wage committee meeting failed to reach a consensus for the second time. The Thai Chamber of Commerce reports that most employers prefer area-based wage adjustments.
• The Chamber of Commerce reports that the rapid strengthening of the baht is impacting exporters who mainly use domestic raw materials. It plans to discuss this with the Ministry of Finance and BoT soon, viewing Bt34/dollar as an appropriate value.
• The BoT reports there are five groupings applying for Virtual Bank licenses: 1) KTB-OR-ADVANC, 2) BTS/VGI-BBL-Sea Group-Sahaphat-Thailand Post, 3) SCBX-KakaoBank-WeBank, 4) TrueMoney-Ant Group and 5) Lightnet Group-WeLab. Results are expected by mid-2025, with successful applicants required to launch services within one year of approval.
• Vietnam projects its semiconductor industry will generate up to US$25bn annually, with 10-15% yearly growth by 2030. It aims to become a leader in some production chain steps by 2040-2050.
• The Chinese embassy in Israel has issued an urgent evacuation notice for Chinese residents in Israel, as tensions escalate in the conflict between Israel and Hezbollah. |
In the short term the SET is expected to move sideways up and has limited upside, supported by the cut in interest rate and expectation of economic stimulus by the government. Short-term baht appreciation is also expected to support greater investment in the Thai capital market compared to the region as fund flows in September show foreign flows turning from net sell to a buy of more than Bt30bn. However, Asian economies, especially China, are still weak. Our strategy is "selective buy". |
The SET is expected to move sideways up but have limited upside in the short term, with funds expected to flow into defensive stocks and those with specific drivers. We recommend "Selective Buy" with four main themes:
1) Investors who want to speculate in stocks with signs of a turnaround and an attractive valuation, with PER and PBV below -1SD - AOT, CRC, AWC, BCH and BEM.
2) Investors who want to speculate in stocks benefiting from flood repairs - HMPRO, GLOBAL, CPALL, BJC, DCC and TASCO, with data showing an average return of 5% for those speculating from mid-September to early November in years with La Nina in 2010-2023 (except 2020 which was derailed by COVID-19).
3) Investors who want to speculate in stocks expected to benefit when the interest rate cycle starts down - Leasing (MTC TIDLOR), Property Development (AP), Commerce (CPALL), Utilities (GULF) and REITs (LHHOTEL and DIF).
4) Stocks expected to benefit from the Vayupak Fund. We highlight stocks in SET100 that have: 1) good dividend yield of at least 3.5%, 2) SET ESG Ratings between A and AAA and 5-star CG and 3) a strong financial position, with profit expected to grow in 2025 - KTB, BBL, BCP, ADVANC and HMPRO. |
CPALL: 2H24 profit is expected to grow YoY, leading the Commerce sector. 3Q24 profit is expected to grow YoY and QoQ, supported by higher sales and margin at CVS and CPAXT. 4Q24 - high season - is expected to be the best quarter in 2024 and valuation is attractive, trading at 2024F PER of 25x (-2SD).
SCGP: 2H24 profit is expected to recover on higher capacity plus entry into high season in Sep-Oct and higher selling price; the company is adjusting its strategy to revive the business in Indonesia. The stock price has fallen 20%YTD, resulting in an attractive valuation at lower than average (-1.5SD). |
