SET faces consolidation after Songkran break

On a macro level, there was a slew of negative news. China reported weaker-than-expected first-quarter GDP growth of 7.7 per cent versus the consensus of 8.0 per cent, raising market concerns over the delay of the global economic recovery.

The IMF also revised downwards global GDP growth to 3.3 per cent this year and 4.0 per cent next year from 3.5 per cent and 4.1 per cent as forecast in January. The IEA also revised downwards global demand for oil this year by 25,000 barrel per day to 90.6 million bpd. This led to the fall in Brent oil prices by US$8 to $98 per barrel. The Cyprus situation also caused some turmoil in gold, as prices dropped more than 15 per cent during the same period.

In the near term, the SET may face weaknesses from weak macro sentiment.

We remain optimistic about the long-term prospects of the Thai market. At current levels, the market is trading at a 2013 price-to-earnings ratio of 13.2 times, which is still attractive given the strong projected EPS growth of 19.5 per cent for this year. Our 12-month target index is intact at 1,688, derived from the bottoms-up approach.

We prefer sectors that will benefit from the strong growth in domestic consumption and investments, including banks (KTB, BBL), property (LH, QH, PS, AMATA) and contractors (CK).

 

Tisco Securities 

Stocks face further consolidation after the Songkran holiday following the global sell-off in risky assets partially driven by weaker-than-expected US retail sales and Chinese 1Q GDP growth of 7.7 per cent on year versus the 8.0-per-cent consensus. The disappointing data easily offset the Bank of Thailand’s upwards revisions to its GDP growth forecasts for 2013 and 2014 by 0.2 basis point each to 5.1 per cent and 5.0 per cent to reflect strong momentum from the fourth quarter of last year and robust fiscal stimulus.

Other factors limiting the SET’s near-term upside are continuing concerns about the baht’s strength and its effect on tourism, exports and FDI; the further decline in global oil prices that threatens to dampen earnings in the energy and petrochem sectors; and profit-taking by foreign investors who have been net sellers of Bt14.2 billion of Thai equities in the month to date.

The central bank is becoming increasingly vocal over rising household debt. It noted that the household debt-to-GDP ratio has almost doubled to nearly 80 per cent in Q4 from 43 per cent in Q1 of 2003. More specifically, it has sharply risen to break its long-term trend over the past few quarters.

Nonetheless, we remain positive on the SET’s medium- and long-term outlooks and continue to recommend using market dips as buying opportunities. We also reiterate our overweight rating on banks, particularly SCB whose Q1 net profit of Bt13.4 billion beat our forecast by 8 per cent and Bloomberg’s consensus by 14 per cent.

Key deviations from our forecast were lower-than-expected cost of deposits and larger-than-estimated dividend income from its equity investment portfolio. BBL and BAY remain our other top picks in the banking sector. 

Telecom stocks could see improved sentiment after the NBTC said it plans easier transfers from 2G to 4G for winners of the licence auction scheduled for September of next year. Our sector favourite remains INTUCH given its multi-year earnings growth potential and dividend expansion. Other stocks worth accumulating at current levels are CPN, AMATA, LH and CPALL.