Real sector may sway market

The stock exchange this week will be under the influence of internal and external factors. Chief among the external factors is the euro-zone crisis, as more remedial measures from the zone and the US are expected. Internally, after Parliament reconvenes on August 1, political tension will rise. 

We expect greater political tension, as all conflicting issues would return, particularly the charter amendment as well as the reconciliation bill. If discussions on the bill continue, this could spark another demonstration. Moreover, a no-confidence motion could be launched, as the Opposition wants to show its views on the government’s first year in power.

On another front, commercial banks’ results boosted the market, with nine banks reporting combined net profits of Bt42.8 billion, up 5 per cent quarter on quarter and 20 per cent year on year. This week is the turn of companies in the real sector to release their quarterly results. We expect several industries like energy, petrochemicals, food, steel and hire purchase to show quarter-on-quarter and year-on-year drops in earnings. This could further dampen market sentiment.

Global demand is the main influence on the real sector. After revision of GDP growth forecasts of several countries, the earnings-per-share growth revision would be next. 

This week, the Federal Open Market Committee (FOMC) and European Central Bank (ECB) will convene on rates on August 2. The US will disclose job data on August 3. There are hopes that more stimulus measures would be launched. External factors could thus both push and pull market sentiment. 

There is a chance that the SET Index this week could decline to 1,150-1,160 points. We advise investors to buy into small and medium-cap stocks, to bet on their financial results and interim dividend payment. SNC, for example, may pay Bt1 dividend in August. In focus are also small-sized developers like MJD, RML and SC, which show high growth potential at low price-earning ratio. 

 

SUKIT UDOMSIRIKUL

Assistant managing director

Investment Strategy Department

SCB Securities

Last week, I believe the SET Index had already completed a correction phase when it recovered from 1,172 points, which is our key support level. Key factors that dragged the market down concerned not only Spain’s debt but also capital-raising issues of PTTEP and CPF.  However, market sentiment improved when ECB President Mario Draghi pledged to take all necessary steps to protect the euro zone from collapse. This triggered investors to buy back ICT and banking stocks, which helped stabilise the market.

The SET Index’s direction, early this week, will depend on the US second-quarter GDP growth. If it grows lower than consensus forecast at 1.4 per cent quarter on quarter, it will be negative for the SET. On the other hand, it will create investor hopes of a new Fed stimulus measure. For the rest of the week, the SET Index is expected to be volatile in the range of 1,175-1,200 points, as there are a lot of issues that may impact the SET. First, hard economic data in July are scheduled to be released such as US ISM manufacturing (consensus expects 50.50 improved from previous 49.7), China Purchase Managers Index Manufacturing (consensus forecast 50.4 improved from previous 50.2), and US non-farm payroll (consensus forecast +100k previous +80k). Secondly, we expect ECB to launch new measures to protect Spain from funding problems. Meanwhile, the FOMC meeting is expected to confirm its previous statement that it will open room for stimulus if needed. Third, we expect that investors will focus on retailer earnings results as they are scheduled to disclose earnings next week. Last but not least, political issues will make headlines with Parliament due to open.

In general, we recommend to sell on strength if the SET Index goes up to 1,200 points. In terms of sectors, we prefer property and construction materials as their valuation is still cheap compared with earnings outlook in the second half of 2012.

 

Tisco Securities

The market’s mood is likely to remain cautious in the near term, with the worsening euro-zone crisis dampening foreign fund inflows and trading volumes. Other negative factors for Thai equities are: disappointing export numbers for June (-4.2 per cent vs +4.5 per cent market consensus), a 9.6 per cent year-on-year decline in the Manufacturing Production Index (MPI) in June (vs -2.5 per cent consensus), and the overhang from PTTEP’s US$3.1-billion (Bt97.73-billion) recapitalisation.

 Meanwhile, second-quarter results are unlikely to lift investor sentiment. Bank earnings were 6-per-cent better than market consensus, but most other sectors should report lacklustre results in the second quarter. However, we expect the telecom sector to report strong year-on-year earnings growth due to lower corporate tax rates, an increase in voice and data revenue and the absence of extra loss items.

Note that Tisco’s Economic Strategy team now expects the Bank of Thailand to postpone its policy rate normalisation until early 2013 (instead of fourth quarter of 2012 as it previously forecast). This follows the statement by the BOT’s Monetary Policy Committee last Wednesday that rising external uncertainties pose substantial risks to Thailand’s export growth and GDP.

Ironically, continued negative news flow from the US and Europe is helping support global stock markets by raising investors’ hopes of further policy action from central banks to kick-start economies. Speculation on stimulus measures may increase ahead of the meetings of the Federal Reserve on August 1 and European Central Bank on August 2.

We continue to emphasise stock selection over big calls on sectors this time round. Among our top picks are ADVANC, KBANK, TUF, HEMRAJ, CPN and STEC.

 

Kitpon pripisankit

Equity analyst and strategist

Kasikorn Securities

The index this week will move sideways down, after a slight recovery last week on expectation of further solutions to the euro zone crisis and QE3 this week. 

Hope is fragile, though, and investors are prepared to sell off shares without concrete solutions. Moreover, the market could be driven down by poor quarterly results of several big-cap stocks in energy and petrochemical sectors. This will eventually lead to downward revision in earning forecasts. 

Yet, we view that this revision offers buying opportunities. 

In this round, the index could fall to 1150 points. It is time for selective buys for profitable stocks with low price-earning ratio and high interim dividend like CENTEL, MINT, TTW, MCOT, TICON, QH, NMG, RS, TISCO, KK, GL, ASK and TK.

This week, the main resistance line is 1190 points.