Sawasdee – September 25, 2024
Short-term upside still limited |
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Market today |
The SET has limited upside with the upper bound at resistances of 1465-1470 due to less push from big caps as they enter overbought position and the rapid strengthening of the baht, generating concerns about exports. Supports are at 1450 and 1440. A fall below supports would be a bad sign. |
Today’s highlights |
· PBOC introduced new economic stimulus measures: Cut 7-day reverse repo rate, reduced minimum reserve requirement for banks, lowered downpayments for second home purchases, and allocated 1 trillion yuan for long-term loans · Terms for Phase 2 of the green electricity auction for a total of 2,180 MW have been released and these allow previously unsuccessful bidders to participate without modifying their proposals. · FTI reports August car exports decreased 1.7%YoY to 86,066 units, while production fell 20.56%YoY to 119,680 units. Both export and production levels are lower than during COVID-19 and close to the 1997 financial crisis levels. · FTI reports August car sales at 45,190 units, down 24.98%YoY due to NPL issues and expects 3Q24 auto loan NPLs to worsen, leading to continued strict lending policies for car purchases. · The Minister of Finance will meet with the BoT governor next week to discuss inflation and the strong baht. The BoT is ready to review its policy if significant new data emerges. · US Conference Board reports the September consumer confidence index fell to 98.7, missing expectations on concerns about inflation, the labor market and future income prospects. · The SEC is studying new regulations requiring major shareholders (both executives and non-executives) to disclose when company shares are used as loan collateral. Implementation is expected by 2025 · Investors are monitoring a new hurricane forming in the Gulf of Mexico, with oil companies beginning to evacuate workers from offshore platforms. |
Strategy today |
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”. |
Trading today |
The SET is expected to move sideways up but has 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. |
Daily top picks |
AOT: Price is expected to recover after removing the overhang of the duty-free shops at arrivals, with profit growing in line with the tourism industry. 4QFY24 (Jul-Sep 2024) core profit is expected to grow YoY, with FY2024 core profit estimated at Bt19.3bn, growth of 109%. |