Foreign inflows could see SET Index test the 1,350-1,400 range in December

Such factors helped relieve pressure on the SET Index. Last week, the gauge rose to above 1,300 points again and passed through the previous high of 1,314 points to 1,324 points. 

From now on, the SET Index will likely move on the following factors. 

Listed companies’ earnings performance: For the first nine months of 2012, the listed companies recorded a combined net profit of Bt561 billion, up 6.2 per cent year on year, equivalent to Bt187 billion per quarter.

Among industries with net profit of more than Bt20 billion and high growth, the petrochemical sector registered the highest earnings growth of 48.6 per cent year on year to Bt34.7 billion, followed by foods’ earnings growth of 32.5 per cent year on year to Bt33.8 billion, the real estate’s of 31.7 per cent year on year to Bt31.5 billion, and the banking’s of 18.9 per cent to Bt131 billion.

The energy sector recorded a 2.8-per-cent drop year on year in net profit for the nine-month period to Bt173 billion. 

For 2012, the research department expects listed companies’ earnings growth at 16 per cent year on year to Bt723 billion. This means that if profit comes as expected in the fourth quarter of 2012, the listed companies have to make a combined net profit of Bt165 billion, up 201 per cent from Bt54.8 billion in the same period of last year, thanks to adverse impacts from last year’s floods. 

The research department expected the targeted profit to be possible. The listed companies’ earnings could grow in 2013.

The US and Europe: There could be psychological impacts on the Thai stock market. The SET Index could be volatile following daily news on uncertainty over the US “fiscal cliff”. Despite clearer direction for assistance to Greece, it could take time and there remain many obstacles to the solutions. The issue to be followed is any impact from solutions to problems, particularly of movements of exchange rates and risky assets.

Fund flow: Based on statistics in the past 12 years (2000-2011), it has been found that there is a possibility of 67 per cent for foreign investors to have net sales of Thai stocks in December. Net sales of Thai stock could take place in 2012 due to an opportunity to sell more of Thai stocks after overseas investors have had accumulative purchase of Thai stocks of over Bt60 billion from November 29, 2011. In November 2012, local institutional investors had net purchase of Thai stocks at Bt12 billion, compared to a six-year average net purchase of Bt5.5 billion. 

Thus, no heavy buy is expected in December 2012 like it was every year. It means that both groups’ capital may not give positive sign to the SET.

The market PER: Normally, the SET Index moves in a PER range between 12-14 times. However, a large amount of fund inflow may see a jump in the SET Index to the PER of 15 times or slightly higher. This could happen in a short period before the PER falls to 12-14 times. 

If the SET Index could stay at the current PER of 15 times, it, at the end of this year, is expected to stand at 1,325 points. If the PER drops to 14 times, the SET Index will stay at 1,237 points.

Recommendation: Investors should hold stocks at 40 per cent of portfolios with high-dividend-yield stocks. These include DCC, TICON, TMT, SNC, INTUCH and ASK.

 

Kitpon Pripisankit

Equity analyst & strategist

Kasikorn Securities

Last week, the SET Index increased 3.30 per cent, or 42.34 points. The stock market was pressured from unclear signals on the planned assistance to Greece and concerns over the US “fiscal cliff” in the early period of last week before concerns eased late in the week. The SET Index rose above the previous high of 1,315 points. 

We see that the major regions’ economies, including the US GDP (second quarter), EU GDP (third quarter) and China GDP (third quarter), have bottomed out. These will be confirmed by major economic figures this week. Major economic figures include China’s  Purchase Managers Index (PMI), Europe’s PMI (today), and the US ISM (today). All tend to improve. If all signs go as expected, the markets will see more risk appetite of investors and there will be more investment weight in risky assets and stocks across the world. This could prompt the SET Index to test the range of 1,350-1,400 points in December 2012 and January 2013.

This week’s stock picks remain those with cheap valuation and potential upgrade, and those beneficial from the state investment. They include NMG, THAI, MAJOR, SPCG, TICON, CK and ROBINS. Interesting big cap stocks are KTB, SCB, PTT and PTTGC.

 

Tisco Securities

After three previous unsuccessful attempts to remain above 1,300 points, the SET looks like it is finally able to stay above this level. Global markets have bounced back from recent lows, aided by improved US and China economic data and hopes of a “fiscal cliff” deal and further easing of US monetary policy through quantitative easing.

The rally coincides with a reduction in domestic political tensions following the failure of the Pitak Siam protest and the Yingluck government’s comfortable victory in last week’s no-confidence vote. There are also signs that foreign selling is near exhaustion, with foreign funds moving back into undervalued big caps in the energy, petrochem and telecom sectors.   

Meanwhile we anticipate a positive court ruling on the 3G licence auction, which could further boost sentiment in the telecom sector. Although we have cut our 2013-14 earnings for ADVANC by 8.4 per cent and 9.1 per cent to reflect risks that licence issuance could be delayed until January 2013 (resulting in a delayed rollout schedule and slower migration) the stock remains our top pick among mobile operators. 

Last week we initiated coverage of INTUCH which owns 40.5 per cent of ADVANC. This offers a potentially more exciting growth story than ADVANC given its 41 per cent holding in THCOM and plans to venture into the DDTV business. We rate the stock a “Buy” with a target price of Bt80, implying upside of 25 per cent.

We maintain our overweight rating on banks due to their growth visibility, return on equity expansion, capital return potential and undemanding valuations. 

Our top picks in the sector are KTB, KBANK and BAY. For consumer plays we advise investors to be increasingly selective due to stretched valuations and the risk of missing earnings targets. However, we still like CPN and CPALL which are key beneficiaries of the wealth expansion effect upcountry and the urbanisation trend.