Sawasdee – October 31, 2024

Expected to recover to 1435-1440

Today’s highlights

• The Minister of Finance says the economy is growing in line with its potential, with a chance to push 2025 GDP growth to 3.5% on more economic stimulus measures, a push in infrastructure projects such as the Land Bridge, EEC, and three-airport rail link that will position Thailand as a financial hub.
• JSCCIB expects GDP to grow 3.5-4.0% next year, spurred by government stimulus and household debt help. It says that both candidates for the US presidency oppose China while seeking friendship with Thailand, and thus suggests the government stay neutral on this issue.
• Preliminary 3Q24 US GDP grew 2.8%QoQ, supported by strong consumer spending but below market expectations and slower than previous quarter of +3.0%QoQ.
• China announced retaliatory measures after the US restricted investment in Chinese technology, said it reserved the right to take action as it deems appropriate.
• The House approved in principle three draft rail transport bills, with the first committee meeting scheduled for November 1. The Deputy Minister of Finance said the draft Entertainment Complex Act may not be sent to cabinet by year-end as a parliamentary review is pending.
• The World Gold Council reports global gold demand in 3Q24 increased 5%YoY to 1,313 tons, a new record, driven by strong investment from Western markets and high-net-worth investors, offsetting weak Asian demand.
• Reuters reports OPEC+ may delay its planned oil production increase by at least 1 month from December amid concerns over weak market demand and increasing oil supply.

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

BCH: Yesterday the stock fell 4%, likely reflecting concerns about weak IPD revenue in 3Q24 due to a drop in Kuwaiti patients. However, 3Q24 core profit is expected to be Bt474mn, growing 4%YoY and 41%QoQ. There is also good news on payment by SC for high-cost care and strong profit growth in 2025.

ADVANC: It benefits from the M&A and is a target of the Vayupak Fund. 3Q24 core profit is expected to be Bt8.3bn, declining 2.7%QoQ on seasonality but growing 9%YoY on the new iPhone, higher tourism-related revenue and higher ARPU.