Sawasdee – October 16, 2024

The SET is expected to move between 1450-1480. Initially, it will battle negative sentiment from concerns in US markets of a recession. However, supports at 1460 and 1450 are expected to able to stand, as the Vayupak fund will support. Upper bound is limited at resistance of 1480 as the market lacks a new catalyst. Key to follow today is the MPC meeting.

Range-bound, watch MPC

Today’s highlights

The BoT's MPC is meeting today. The market expects the policy rate to remain at 2.50%, though some analysts predict a 25 bps cut to 2.25%.
• The Washington Post reports Israel's Prime Minister has informed the US President of plans to strike military targets in Iran but says Israel will not target oil facilities or nuclear plants.
• The IEA forecasts global oil demand to increase by 0.9 Mb/d per day this year and 1 Mb/d next year. China's oil demand fell by 0.5 Mb/d in August, the fourth month of decline.
• The IMF warns that global public debt is set to exceed US$100tn for the first time this year and may accelerate faster than expected due to political trends supporting increased government spending and sluggish economic growth. The IMF calls for worldwide fiscal tightening.
• The PM has ordered the Ministry of Finance and Ministry of Transport to study a flat Bt20 fare for mass transit trains across all lines to reduce car usage and cut cost of living. The goal is to implement this by September 2025.
• The Minister of Tourism and Sports reports 27,218,869 foreign tourists this year, generating ~Bt1.27tn in revenue. An increase in tourists from Europe and the US is expected to boost these numbers further.
• The Minister of Finance has announced additional relief for flood victims, including an extra Bt10,000 per household for mud cleanup, income tax exemptions, rent waivers for state properties, and special loan programs from state banks.

Strategy today

In the short term the SET is expected to move sideways with limited upside as the market waits to see the BoT's interest rate direction. The MPC meets on Oct 16 and we expect a 25bps cut. The market is also hoping for additional stimulus from the government. There are specific external factors, including 3Q24 earnings releases by US and EU companies, less volatility in China's stock markets and the ECB meeting on Oct 17, where a 25-bps interest rate cut is expected, with interest rate direction expected to remain the same. Our strategy is "selective buy".

Trading today

The SET is expected to move sideways with limited upside, waiting for Thai interest rate direction and wary of geopolitical tension, while banks at the same time begin releasing 3Q24 earnings. We recommend "Selective Buy" with four main themes:
1) 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, Petrochemical, Packaging and Electronics.
2) For risk takers, on expectations of a cut in rate by the MPC, speculate on LHHOTEL, DIF, CPALL, AP and SIRI; leasing (MTC, TILDOR) has already moved up, already discounting expectations. If you expect no rate cut, speculate on stocks with high debt/expenses in US dollars - AAV, GPSC and BCP.
3) 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 and HMPRO.
4) Rising Brent price on concerns of spreading Middle East conflict. We expect price to average US$75-85/bbl. Oil stocks are able to hedge the risk. For investors who can take risks, we recommend an upstream oil stock - PTTEP.

Daily top picks

GPSC: The company will benefit in the short term from declining European natural gas price and bond yield. 2024 core profit is expected to be Bt4.58bn, growing 33.8%YoY, with growth continuing at 16.3%YoY in 2025, supported by contribution from renewable projects with high capacity in Taiwan and India. Recommend to buy for trading at not higher than Bt46/share.
LHHOTEL: The fund benefits from recovery of tourism and an interest rate cut. 3Q24 core profit is expected to be Bt428mn, up 3.6% QoQ on seasonality but 87.8% YoY on booking revenue from two new assets, Grand Centerpoint Pattaya and Grand Centerpoint Space Pattaya, in which it invested in 4Q23.

Today’s reports

Petrochemicals - Lower naphtha cost aids spread
TISCO - 3Q24: Met expectations