SET: Domestic factors figure large in the next two weeks

In the past two weeks, the SET Index moved with relatively volatility. This was normal for the Stock Exchange of Thailand, which is in a transition from excess liquidity driven for a long time to being earnings-driven. Those building up volatility come from other countries. Last week, the focus was mostly on the statement by the US Federal Reserve chairman. 

The next two weeks could see the SET move with volatility. Two domestic factors need to be followed.

_ Listed companies’ second-quarter earnings: In the next two weeks, the stock market will see the release of these performance figuress, which are expected to be slightly lower than in the first quarter.

In the first quarter, listed companies saw net profits of Bt244 billion (27 per cent of this year’s estimated profit), given the energy sector’s stock and foreign-exchange losses. Usually the energy sector’s net earnings account for about 30 per cent of the market.

Commercial banks’ second-quarter earnings came in as expected. 

The residential-developer group is expected to show outstanding performance in the second quarter, compared with the first, with a chance to trade for capital gains, provided a period of condominium transfers and income realisation. Stock picks are PS([email protected]), SC ([email protected]) and QH ([email protected])

The ICT Group’s stock pick is DTAC (FV@Bt138), while the construction group has STPI ([email protected]) as a stock pick thanks to an estimate of high growth on the back of more income realisation from large-scale projects.

_ Domestic political developments: The House of Representatives’ general session will be convened on August 1 when major issues will be debated. This will pressure the stock market. The issues include an indemnity bill, amendment of the Constitution, expenditure budget for fiscal 2014, a bill to allow the Finance Ministry to borrow Bt2 trillion, and no-confidence motions for several issues, particularly the rice pledging scheme. 

The investment strategy focuses on gradual purchases of stocks with sound fundamentals and high upside compared with analysts’ fair value for medium-to-long-term investment. 

About 40-50 per cent of an investment portfolio should be in stocks. Attractive groups are information and communications technology, with INTUCH as the stock pick, construction with STEC and STPI, and transport with BECL and AOT.

 

Kitpon Pripisankit

Strategist

Kasikorn Securities

The SET Index dropped early last week on concerns over China’s likely economic slowdown after growth in gross domestic product fell to 7.5 per cent year on year in the second quarter from 7.7 per cent in the first. The SET Index rebounded to test its one-month high at 1,490 points after the chairman of the US Federal Reserve gave a signal for not reducing the size of its quantitative easing (QE) in the near future, which soothed markets in the short term. 

The SET also gained support from the gradual accumulation of Thai stocks worth Bt8.8 billion in the past seven trading days, and the weakening of the yen against the US dollar.

We expect the SET to move sideways this week. Although the gauge is forecast to test 1,500-1,520 points, the market is likely to face greater fluctuation, given the risk of profit-taking and concerns over China’s slowdown. 

HSBC will report July’s preliminary Manufacturing Purchasing Managers Index tomorrow and US house resales will likely improve. 

The overall strategy focuses on gradual accumulation for long-term investors and trading in a range of 1,460-1,500 points for profits for short-term investors. 

Buy is recommended in groups including banks, property and ICT, with sharp drops in prices and stocks with likely satisfactory interim dividends. These stocks include KTB, SCB, BBL, TICON, SC, ADVANC, DTAC and MAJOR. 

It is difficult to estimate individual stocks. Investors could select equity exchange-traded funds such as TDEX when the SET50 declines to 980 points, and sell for profit when the SET Index rises to test 1,020 points.