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Nov 11. 2018
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By The Nation

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Bear markets tend to present bargain-hunting opportunities to long-term investors. We believe the China market would perform better next year.

Our main rationale is not the meeting between US President Donald Trump and Chinese President Xi Jinping during the G20 meeting at the end of this month, but China’s upcoming massive tax reform initiative.

Next year, the Chinese government plans to roll out massive income tax cuts for both corporates and individuals. Meanwhile, China’s monetary policy remains on an accommodating path, as seen from the repeated easing of banks’ reserve requirements this year. The PBOC or the China central bank estimates that the government tax cut could boost China’s gross domestic product growth by more than 1 per cent. 

We believe the decline of the Chinese equity market should provide a good opportunity to accumulate decent stocks with solid fundamentals that are undervalued. In this regard, we recommend two exchange-traded funds listed in Hong Kong that invest in Chinese stocks: (1) “Mirae Asset Horizon MSCI China ETF”, which tracks the “MSCI China Index” comprising 139 key Chinese stocks; and (2) “Mirae Asset Horizons CSI 300 ETF”, which tracks the “CSI 300 Index”, comprising 300 key Chinese stocks listed on the Shanghai and Shenzhen exchanges. –|Thanawat Patchimkul, Head of Research, DBS Vickers Securities (Thailand)

Sideways movement 

The Thai stock market has been moving with higher volatility, swinging in a range of 1,656-1,688 points, amid the US mid-term election and the third-quarter earnings results of listed Thai companies. Exports and tourism are expected to recover, supported by the government’s stimulus. 

The Bank of Thaland’s Monetary Policy Committee is expected to leave the policy rate unchanged at its November 14 meeting following the slowdown in last month’s economic figures. The election date tentatively set for February 24 has now been confirmed and a new Cabinet will take office in June.

This week, the SET Index will likely move sideways in a range of 1,660-1,685 points due to a combination of negative and positive factors.

Investors need to keep a close watch on bond yields, the US dollar appreciation and corporate earnings results. 

Possible sell-on-fact could prevent stock rises. We prefer stocks with particular positives such as BTS, which could gain from bidding for state-projects. We also like to hold ANAN and COM7 until their earnings results. Despite sell-on-fact on MTC, it could be selected as one of the stocks in MSCI on November 13. We suggest sell on NYT after its recent increases. BTS’ technical fair price is Bt9.80.– Tisco Securities

Index under pressure 

The SET Index is forecast to swing in a range of 1,600-1,700 points for the rest of this month under pressure from: 1) consistent retreats of global crude prices; 2) appreciation of the US dollar and US bond yields after the Fed statement. The markets weight more on the expected US rate rise next month. We suggest “hold” on existing portfolios, not to add new ones until market valuation turns attractive.

A split of the US Congress after the mid-term election could result in: 1) Easing of US dollar and bond yields, given increased difficulty for the US to drive pro-growth policies such as tax reduction. Emerging-market currencies could strengthen; 2) Gradual improvement in the investment environment in emerging markets, as Trump will likely take a less-aggressive position on sensitive issues, including the trade war with China; 3) six to seven per cent rise in stock markets around the world based on our empirical study since 1900. 

Oil: The global crude prices will likely move sideways in the short-term after the increase in US crude stock by 5.7 million barrels, according to its latest weekly report and the US permission for eight countries to import oil from Iran. – Research Department, Trinity Securities


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