Sawasdee – October 22, 2024

Rising US bond yield pressure

Today’s highlights

• BOI reports investment applications in 9M24 increased 42%YoY to Bt720bn, the highest in 10 years, driven by increased investment in new industries such as semiconductors, electronics, digital, EV and renewable energy.
• The PBOC announced a 25 bps cut to the Loan Prime Rate (LPR) for 1-year and 5-year terms to 3.1% and 3.6% respectively to stimulate the economy, while signalling potential cuts to the Reserve Requirement Ratio (RRR) for commercial banks by year-end.
• Commercial banks like KBANK and SCB have started cutting interest rates 12-25bps after the BoT cut its rate, with new GSB, GH Bank and BAAC rates taking effect November 1st.
• The Office of Agricultural Economics has revised its 2024 agricultural economic growth forecast to between -0.8% and 0.2% due to El Niño pressure in first half of the year and recent floods, but with support from increased rainfall, improved crop quality and higher agricultural product demand.
• The government is preparing to announce a "Thailand Winter Festival" on October 29 to promote "soft power", with the THACCA Act expected to be implemented in 2025 to support tourism and "soft power" across 11 industries.
• The Deputy Finance Minister is meeting Hong Kong's Finance Minister at the APEC finance ministers' meeting to discuss financial cooperation to connect financial centers between the two economies and promote trade and investment.

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 seen as 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

Although the SET continues to climb, upside is beginning to be 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:
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, Petrochemicals, Packaging and Electronics.
2) 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.
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, HMPRO and BCP.
4) 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

BDMS:Our top pick in the Healthcare sector. 3Q24 core profit is expected to reach an all-time high of Bt4.3-4.4bn, up YoY and QoQ. 2024 core profit is expected to grow 13% to Bt16bn, with growth continuing at 8% in 2025. Valuation is attractive, trading ad 2024F PER of 27x (-2SD). Recommend to buy for trading at not more than Bt29.25/share.
BEM: 2H24 profit is expected to be stronger HoH. 3Q24 core profit is expected to grow YoY and QoQ, supported by more MRT riders and higher fares. There is an additional upside risk from the double-deck and south Purple Line projects, which are not yet included in our forecast.

Today’s reports

KBANK - 3Q24: Beat INVX on FVTL gain
KTB - 3Q24: In line, downgrade after price rise