Limited scope seen for SET Index to rise this week

Foreign investors were net sellers of Thai stocks worth over Bt6.1 billion on April 11, 12 and 17. Until now, banks’ profits have grown more than 97 per cent quarter on quarter, higher than analysts’ estimates of 84 per cent. 

We expect continued speculation on banks’ earnings results early this week and the SET Index will likely go up to test its previous record of 1,213 points. However, there is less possibility for the gauge to reach a new high due to the following reasons:

_ The real sector is forecast to show both positive and negative results in their first-quarter earnings. Oil-related companies like PTTEP and TOP are expected to show good earnings performance due to stock gains. Construction material stocks like SCC, steel, and electronics parts sectors are projected to see slowdowns. SCC is scheduled to announce its earnings result on Wednesday. Such performance figures could pressure the SET Index.

_ Foreign investors are expected to continue their selling spree. From November 29, 2011, foreign investors’ accumulated buying of Thai stocks was Bt94 billion. Based on a study of previous trading rounds, it was found that foreign investors’ selling mostly accounts for about 40 per cent of net purchase of stocks. If there is a selling spree by foreign investors, a significant support level is at the current price to earnings of 14 times or 1,130 points.

_ Concerns remain about external factors, particularly Europe’s debt problem. Spain starts to signal its lower capability for debt repayment. The US economic figures are more volatile. China is on a close watch in its attempt for a soft landing.

In the overall picture, we maintain our suggestion for careful investment and maintain stock holding at 40 per cent of total investment portfolio. Property developers, particularly those developing residential units for sale and industrial estates, are expected to outperform the market. This expectation is due to clear signs of recovery on their earnings performance in the first quarter of 2012. Stock picks include PS, RAIMON, SPALI (developers of residential units) and ROJNA, HEMRAJ (industrial estates).

 

Chaiyaporn Nompitakcharoen

Head of tactical research

Bualuang Securities 

 

Last week, the SET continued to move up. The SET closed at 1,194.6 points, plus 2 per cent. Bank (thanks to the better earnings results in the first quarter), commerce, automotive and property were the best-performing sectors on the back of domestic consumption. Energy, petrochemical and tourism etc are laggard. 

We expect the SET Index to be volatile this week. We expect 1,180 points to be the short-term support. However, we still see limited upside with our target of 1,240 points for fiscal 2012. So, we maintain a cautious optimistic outlook for the long to medium-term investment time horizon. 

We anticipate neither any policy change at the US Federal Open Market Committee meeting tomorrow and Wednesday, nor do we think this is a meeting where the committee will want to convey a new message. But the forecasting process, and Ben Bernanke’s comments, may give us some new insights into the thresholds for further easing and how the committee’s thinking about the future course of monetary policy is evolving. 

Key internal factors are:

First-quarter earnings results (PTTEP and SCC are expected to announced. We anticipate neutral earnings momentum); Bank of Thailand’s economic figures (monthly report for March) and we see consensus already on the upward revision of the Thai gross domestic product. 

For trading, speculative buy would be our suggestion strategy for the short term. We expect medium to small-cap stocks to outperform this week. We recommend SPCG, JAS, BEC, CPN.

 

Kavee Chukitkasem

Assistant managing director

Kasikorn Securities

 

Last week saw the Thai stock market rebound amid negative news from other countries, particularly concern over Spain’s financial health and the possibility of a leadership change in France, which could lead to solutions to the euro-zone’s debt problem. 

Besides, investors were disappointed with Chinese and US economic figures. Prices of oil and gold also declined in response to these negative news items. However, the Thai bourse saw a positive factor from banks’ robust first-quarter earnings announced last week on speculation for good profit results of other sectors.

Despite volatility of stock markets worldwide and commodity prices last week, we expect the Thai stock market to rise to test resistance levels of 1,200 or 1,214 points this week. The likely increase could be driven by Thai listed companies’ earnings announcements. Another positive external factor could boost the stock market as IMF’s capital increase tends to find success and the Fed may announce a new round of its economic stimulus measures through purchases of mortgage-back securities in its meeting.

In the short term, the Thai stock market continues to have positive momentum. However, we suggest investors gradually reduce their short-term portfolios due to some warning signs:

_ The global economic figures have started to slow down. 

_ Yields on European bonds have begun to rise on concerns over Spain’s debts and election results.

_ Thailand’s inflation is another concern after an increase in the minimum daily wage. 

_ Technically, the resistance levels between 1,230 and 1,240 points appear to be solid. 

However, we remain positive for the Thai stock market in the medium term. 

There is a good chance for investors to accumulate stocks. We have set the SET Index target at 1,350 points this year and that could happen in the latter half of this year.

 

Tisco Securities

 

Despite renewed concerns over the euro-zone sovereign debt, we have raised our 12-month SET target to 1,300 points (2013 fiscal P/E of 12.5x), which implies a 10-per-cent upside. Our new target is midway between our bottom-up target price level of 1,240, and upper threshold of 1,350 – one standard deviation above historical mean PE.

Fund-flow surges activated by on/off expectations for more US Fed and/or ECB monetisation measures will, in our opinion, dominate other SET drivers for the foreseeable future. Near-term, the recent yield spike in Europe and correction in global markets may re-inflate expectations for more monetisation. Meanwhile, more easing in China looks a sustainable tailwind for markets, if the 2008-2009 easing cycle is any guide.

 

Other positives include: 

_ a compound annual growth rate of 20 per cent in earnings for 2012-13 fiscal;

_ growth visibility afforded by tax cuts and the flood base effect;

_ a lengthy period of political stability; 

_ record government expenditure outlay as a percentage of GDP; 

_ current account resilience to high oil prices; and 

_ a manageable fuel subsidies bill.

 

Our bullish view on bank stocks has been underpinned by better-than-expected first-quarter results for major banks. The first-quarter earnings of KBANK and SCB, our top picks in the sector, beat Bloomberg’s consensus by 20 per cent and 11 per cent respectively. Given their potential for stronger loan and insurance fee growth in 2012, we see upside risks to our 2012 earnings estimates for both banks.

We continue to favour the energy and petrochemical sectors, which are net beneficiaries of 

elevated oil prices and are trading at low valuations. We also find value in selective mid-caps includ-ing industrial estates and hospitality.