Sawasdee – November 7, 2024

Concerns pressure the index

Today’s highlights

• Republicans won the US election in both the Senate (52 vs 42) and House (198 vs 180), winning all seven swing states, making Donald Trump the 47th US President.
• The Thai Bankers' Association unveiled household debt relief criteria: the loan must be an NPL of not exceeding one year, the housing loan cannot exceed Bt3mn and vehicle loan cannot be above Bt700,000, with SME loans not exceeding Bt3mn. The total amount of relief is Bt1.4tn. Funding will come from cutting banks' contribution to FIDF from 0.46% to 0.23%.
• A UTCC survey says spending on Loy Krathong (November 15) is expected to reach Bt10.35bn, up 3.5% YoY, the highest in nine years. However, the Bt10,000 handout policy is not enough to stimulate the economy and it urges the government to find more ways to help.
• GH Bank says the housing price index in Bangkok and vicinity in 3Q24 moved up due to rising cost for land, labor, and oil raising construction costs, suggesting prices will go up next year for new housing projects and condominiums.
• October headline inflation rose 0.83% due to increasing food prices, especially fresh vegetables and fruits, and higher oil and electricity prices, off a low base from last year's relief measures.
• JSCCIB has revised 2024 GDP growth forecast to 2.6-2.8% from 2.2-2.7%, driven by exports, purchasing power stimulus, budget disbursement and upcoming short, medium, and long-term measures.
• The Petroleum Institute recommends the government expedite gas source procurement during energy transition, as current gas reserves are in a sharp decline, leading to increased LNG imports and volatile prices affecting electricity costs.

Strategy today

In the short term the SET is expected to recover from 1450 on hopes China's inflation will be lower than expected, leading it to increase stimulus, plus a likely 25 bps cut by the Fed, which will support stock markets and the US election, which will help clear the uncertainty about the US economy. Since Trump won the election, the market is likely to be highly volatile. Domestically, 3Q24 earnings announcements are expected to drive the market. However, FX volatility and funds flowing out of Asia's markets will pressure the SET's upside at 1500. Our strategy is "selective buy".

Trading today

In the short term the SET is expected to move up from 1450 but is still pressured at 1500 due to FX fluctuations and fund outflow from Asia. We recommend "Selective Buy" with four main themes:

1) Earnings plays: stocks on which we rate Outperform with strong fundamentals and 3Q24 profit - CPAXT, TU, BCH, MTC, CBG, WHA, BDMS, CPALL, TIDLOR, BEM and AOT.
2) Global plays: stocks which benefit from a weakening baht in the short term, with YoY 3Q24 earnings growth and growth both HoH and YoY in 2H24 - TU, AOT.
3) Stocks with high dividend yield and expected to be targets of the Vayupak and tax-deductible funds (SSF, RMF and ThaiESG) and 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

CPAXT: 3Q24 profit is expected to grow YoY on higher sales and margin, and then rise to the year's high in 4Q24, growing YoY and QoQ. After the merger, synergy will begin to materialize in 4Q24 and will be clearer by mid-2025. The company is positioned to benefit from government stimulus.

AWC: 3Q24 profit is expected to be best among peers, with core profit shooting up 92%YoY and 19%QoQ, while peers see a QoQ decline. 2024 core profit is expected to grow 57% and grow another 23% in 2025, supported by improving hotel operations. The strong earnings will drive stock price.