MPC meeting, quarterly results in focus

 

 

The Thai stock market rose 3.5% month to date and continued to outperform regional peers which only inched up 0.4% on average. Leading the gain were Petrochemicals after the sharp rebound in global oil prices, followed by Media & Entertainment, Automotive, and Property Sectors. Foreign investors were net buyers MTD with Bt4.1bn net buy position. YTD, the Thai market has risen 18.3% against regional peers’ paltry 4.6% gain.

The Eurozone’s second quarter growth may not be as bad as feared, although the economy probably did contract in the quarter. However, risks still loom ahead and the recession could deepen in the second half of the year.

In the US, existing home sales dropped to an eight month low, the Philly Fed index is 5 points worse than expected, and weekly jobless claims have shot back to 386k. Business investment growth averaged 3% (QoQ, saar) for the past two quarters; core capex orders had been flat as a pancake for ten months. DBS economist has lowered US GDP growth forecast to 1.8% for both 2012 and 2013, from 2.0% and 2.2% previously. 

Back in Thailand, the Monetary Policy Committee (MPC) will meet to decide on the policy rate on July 25; we expect it to keep the policy rate at 3.0%. Investors will be focusing on the 2Q12 results of listed companies over the next few weeks. We recommend selecting stocks that offer good earnings visibility, visible catalysts, and decent dividend yields. At the top of our BUY list are Amata Corporation (AMATA), CS Loxinfo (CSL), Pruksa Real Estate (PS), Minor International (MINT), and Samui Airport Property Fund (SPF).

 

SUKIT UDOMSIRIKUL

Assistant managing director 

Investment Strategy Department

SCB Securities 

Last week, SET was pressured by specific factors such as excise tax issue for ICT stocks and capital raising issue for PTTEP. Meanwhile, bank stocks reported 2Q12 earnings results increased from 2Q11 particularly the small banks such as KK, TISCO and TCAP which reported earnings beat market consensus. In term of macro factors, Spain was approved to receive loan was the positive factors and also cooperates in US reported earnings above market consensus though US economic data came out weak but it hasn’t much impact to US stock market.

This week, market sentiment turns to be neutral after SET index failed to break 1230 points last week. Therefore, SET is expected to move sideway in the range of 1190- 1230 points and due to it has less important economic data which are scheduled to be released in this week thus 2Q12 earnings report will be a key driver to market. After banking, some company of construction material and energy sectors are scheduled to release earnings, base on our forecast its earnings growth will be moderate but outlook is more positive in 2H12. Therefore, we recommend buy SCC with 12 months target price at Bt400 per share.

On the economic front, MPC is scheduled to meet on 25July, we expect no change of policy rate in this meeting. In US, commerce department will be announced preliminary 2Q12 GDP, Reuters poll expects GDP will be 1.8%QoQ decline from grew 1.9%QoQ in 1Q12. 

 

CHAIYAPORN NOMPITAKCHAROEN

Head of Tactical Research

Bualuang Securities

Thai equity market had moved in range trade of 1210-1230 last week while North Asia stock market moved higher. On 

 macro perspective, Thailand has outperformed MSCI Asia ex Japan for first six months on strong recovery posted flood, starting investment cycle, as well as low sovereign risk. Our research team expects domestic plays in general will post moderate growth while commodity related will post profit contraction, mainly due to inventory loss, and humble profitability. Financial companies reported net profit above our projection by 10-30%, which prompted earnings upgrade. It implies that earnings growth momentum for Thailand remains solid. However, profit taking on fact following earnings release should take place. Therefore, we view that the SET should likely move in trading range of 1190-1240 for this week. Our favorite stocks are DTAC, INTUCH, SC, and SITHAI.

 

KIATKONG DECHO

Head of Retail Research

CIMB Securities (Thailand) 

The banking sector's quarterly results turned out to be better than expected, improving by 27 per cent year on year and 11 per cent on quarter. This reflected the sector's strengths and this trend should continue in the second half. Still, share prices may not move as much, due to the currently high price to book value (P/BV). The sector's P/BV is now about 1.9 times above the standard deviation. It is easy to pass the 1-time level.

We view that banking share prices would be stabilised for a while, boosted mainly by the quarterly results. Still, another rally is rare, as most have hit their record high. It is not thus the right time to buy into these stocks. 

Telecom stocks have also witnessed a recent price hike, on speculation on their quarterly results as well as 3G auctions. The 12-month price to earning ratio has been well beyond the average. Buy into the stocks when the prices ease. The Excise Department's move to impose the telecom excise tax on these companies is now a negative factor pressuring the sector. 

Stocks in the energy and petrochemical sectors are now cheap, with low P/E and relatively lower prices than regional peers. Share prices crept slowly though global oil and petrochemical prices have escalated. Still, the investment should be delayed until the quarterly results are revealed. 

Given that share prices of stocks in the three major sectors are in relatively high levels, we view that the SET index this week will face a minor correction, to 1,200 points or lower. Mid to small-cap stocks would be in play, like those involved in the construction, industrial estate, housing, construction material, auto accessory, commerce and agricultural sectors. 

Volatility will remain this week, with selling pressure on telecom, banking, energy and petrochemical stocks. Investors should delay investment until the index falls to a lower base. This week's support level is 1185-1200, while the resistance line is at 1220-1230 points. Recommended stocks are those in the commerce, property and aviation (AOT) sectors.

MPC MEETING, QUARTERLY RESULTS IN FOCUS 

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  CHANPEN SIRITHANARATTANAKUL

Head of Research, DBS Vickers Securities (Thailand)

The Thai stock market rose 3.5% month to date and continued to outperform regional peers which only inched up 0.4% on average. Leading the gain were Petrochemicals after the sharp rebound in global oil prices, followed by Media & Entertainment, Automotive, and Property Sectors. Foreign investors were net buyers MTD with Bt4.1bn net buy position. YTD, the Thai market has risen 18.3% against regional peers’ paltry 4.6% gain.

The Eurozone’s second quarter growth may not be as bad as feared, although the economy probably did contract in the quarter. However, risks still loom ahead and the recession could deepen in the second half of the year.

In the US, existing home sales dropped to an eight month low, the Philly Fed index is 5 points worse than expected, and weekly jobless claims have shot back to 386k. Business investment growth averaged 3% (QoQ, saar) for the past two quarters; core capex orders had been flat as a pancake for ten months. DBS economist has lowered US GDP growth forecast to 1.8% for both 2012 and 2013, from 2.0% and 2.2% previously. 

Back in Thailand, the Monetary Policy Committee (MPC) will meet to decide on the policy rate on July 25; we expect it to keep the policy rate at 3.0%. Investors will be focusing on the 2Q12 results of listed companies over the next few weeks. We recommend selecting stocks that offer good earnings visibility, visible catalysts, and decent dividend yields. At the top of our BUY list are Amata Corporation (AMATA), CS Loxinfo (CSL), Pruksa Real Estate (PS), Minor International (MINT), and Samui Airport Property Fund (SPF).

 

SUKIT UDOMSIRIKUL

Assistant managing director 

Investment Strategy Department

SCB Securities 

Last week, SET was pressured by specific factors such as excise tax issue for ICT stocks and capital raising issue for PTTEP. Meanwhile, bank stocks reported 2Q12 earnings results increased from 2Q11 particularly the small banks such as KK, TISCO and TCAP which reported earnings beat market consensus. In term of macro factors, Spain was approved to receive loan was the positive factors and also cooperates in US reported earnings above market consensus though US economic data came out weak but it hasn’t much impact to US stock market.

This week, market sentiment turns to be neutral after SET index failed to break 1230 points last week. Therefore, SET is expected to move sideway in the range of 1190- 1230 points and due to it has less important economic data which are scheduled to be released in this week thus 2Q12 earnings report will be a key driver to market. After banking, some company of construction material and energy sectors are scheduled to release earnings, base on our forecast its earnings growth will be moderate but outlook is more positive in 2H12. Therefore, we recommend buy SCC with 12 months target price at Bt400 per share.

On the economic front, MPC is scheduled to meet on 25July, we expect no change of policy rate in this meeting. In US, commerce department will be announced preliminary 2Q12 GDP, Reuters poll expects GDP will be 1.8%QoQ decline from grew 1.9%QoQ in 1Q12. 

 

CHAIYAPORN NOMPITAKCHAROEN

Head of Tactical Research

Bualuang Securities

Thai equity market had moved in range trade of 1210-1230 last week while North Asia stock market moved higher. On 

 macro perspective, Thailand has outperformed MSCI Asia ex Japan for first six months on strong recovery posted flood, starting investment cycle, as well as low sovereign risk. Our research team expects domestic plays in general will post moderate growth while commodity related will post profit contraction, mainly due to inventory loss, and humble profitability. Financial companies reported net profit above our projection by 10-30%, which prompted earnings upgrade. It implies that earnings growth momentum for Thailand remains solid. However, profit taking on fact following earnings release should take place. Therefore, we view that the SET should likely move in trading range of 1190-1240 for this week. Our favorite stocks are DTAC, INTUCH, SC, and SITHAI.

 

KIATKONG DECHO

Head of Retail Research

CIMB Securities (Thailand) 

The banking sector's quarterly results turned out to be better than expected, improving by 27 per cent year on year and 11 per cent on quarter. This reflected the sector's strengths and this trend should continue in the second half. Still, share prices may not move as much, due to the currently high price to book value (P/BV). The sector's P/BV is now about 1.9 times above the standard deviation. It is easy to pass the 1-time level.

We view that banking share prices would be stabilised for a while, boosted mainly by the quarterly results. Still, another rally is rare, as most have hit their record high. It is not thus the right time to buy into these stocks. 

Telecom stocks have also witnessed a recent price hike, on speculation on their quarterly results as well as 3G auctions. The 12-month price to earning ratio has been well beyond the average. Buy into the stocks when the prices ease. The Excise Department's move to impose the telecom excise tax on these companies is now a negative factor pressuring the sector. 

Stocks in the energy and petrochemical sectors are now cheap, with low P/E and relatively lower prices than regional peers. Share prices crept slowly though global oil and petrochemical prices have escalated. Still, the investment should be delayed until the quarterly results are revealed. 

Given that share prices of stocks in the three major sectors are in relatively high levels, we view that the SET index this week will face a minor correction, to 1,200 points or lower. Mid to small-cap stocks would be in play, like those involved in the construction, industrial estate, housing, construction material, auto accessory, commerce and agricultural sectors. 

Volatility will remain this week, with selling pressure on telecom, banking, energy and petrochemical stocks. Investors should delay investment until the index falls to a lower base. This week's support level is 1185-1200, while the resistance line is at 1220-1230 points. Recommended stocks are those in the commerce, property and aviation (AOT) sectors.