Sawasdee – October 29 , 2024

Weakening, lacking catalyst

Today’s highlights

• Today, monitor discussion between the Ministry of Finance and the BoT on the 2025 inflation target, expected to be within 1.5-3.5%, hoping to give the BoT more room for policy rate cuts.
• AOT reports air traffic volume at 6 airports for FY2024 (Oct 2023-Sep 2024), with 119.29mn passengers, up 19.2%YoY, comprising 72.67mn international passengers (+34.8%) and 46.62mn domestic passengers (+1.0%).
• The Ministry of Commerce reports exports in September at US$25,983mn, +1.1% YoY (vs market expectations of +3%), imports at US$25,589mn, +9.9%, resulting in a trade surplus of US$394mn, the second month of surplus.
• This week, watch earnings reports from US big-cap tech companies (Mag7), with 5 out of 7 reporting: Alphabet, Meta Platforms, Apple, Microsoft, and Amazon.com.
• Yesterday, China's Ministry of Commerce again warned the EU, saying that if the EU attempts to negotiate separately with EV manufacturers while in talks with the Chinese government, it would be considered a breach of trust and affect overall negotiations.
• China's National Bureau of Statistics reports that industrial profit in September contracted 27.1%, the steepest fall this year, reflecting China's weak economic conditions and potentially leading to increased economic stimulus measures
• JSCCIB submitted a four-point white paper to the Prime Minister, addressing economic issues, SME lending support, flood-drought management and competitiveness enhancement. It believes the government can achieve 5% GDP growth

Strategy today

In the short term the SET is expected to move sideways up, driven by 3Q24 earnings of US and Thai companies, expected to show growth, plus hopes for additional stimulus from China. However, the SET has limited upside with resistance of 1500 due to the strong US dollar that is pulling funds out of emerging markets, while the market is adjusting to the possibility the central bank may cut interest rate less than expected. In the short term be cautious on stocks that benefit from the lower interest and have already risen to reflect an expected sequential cut in rates (DELTA, GULF, ADVANC and INTUCH) as the market is rebalancing. Our strategy is "selective buy".

Trading today

Although the SET has pushing momentum, short-term upside is limited as companies begin releasing 3Q24 earnings and as the market waits for a new catalyst. We recommend "Selective Buy" with four main themes:
1) Global plays: stocks whose 3Q24 earnings are expected to continue to grow YoY, and 2H24 expected to grow HoH and YoY, with short-term benefit from the weakening of the baht since Oct - KCE, TU, MINT and AOT.
2) Earnings plays: stocks with strong fundamentals and strong 3Q24 profit - BEM, BCH, BDMS, AU and TNP. Be cautious on sectors that are likely to come in below expectations - Energy, Petrochemicals and Packaging.
3) Stocks with high dividend yield and expected to be targets of the Vayupak and tax-deductible funds with following characteristics: dividend yield of at least 3.5%, high SETESG ratings and high CG and earnings expected to grow - BBL, ADVANC, HMPRO and BCP. Recommend to buy on dip as prices have already moved up.
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

BBL: The only bank tagged Outperform, with several catalysts. 1) It has the cheapest valuation in the sector, 2) credit cost is likely to fall and there is upside on loans to THAI, 3) it is expected to have the highest loan growth in the sector, 4) there is possible upside to NIM and 5) it is very likely to raise dividend payout ratio.
TASCO: It benefits from falling oil price. 3Q24 core profit is expected to grow YoY and QoQ, supported by higher asphalt sales due to acceleration of government budget spending (Highway Department and Rural Road Department) before the end of FY2024 (end-Sep), while domestic and overseas asphalt prices are increasing.

Today’s reports

BEM - Preview 3Q24F: To be another good quarter
DELTA - 3Q24: Strong Core Earnings Driven by AI
ERW - Preview 3Q24: Weak quarter
PTTEP - 3Q24: QoQ drop in profit was in line