Fundamental stocks favoured to mitigate portfolio risk

This makes it difficult for the economy to achieve ASP Research’s estimate of 1.5 per cent for the whole of 2014.

To get to that 1.5 per cent, the economy has to expand at least 5.5 per cent YoY this quarter. And that’s not possible under the current conditions. Basically, this year’s GDP growth will likely come out to less than 1 per cent.

Next year is expected to see 3.5 per cent, based on the ascending global economic recovery and start of state investment projects as planned, which will support exports.

The growth figure is in line with listed companies, which have reported lower-than-expected profit of Bt193 billion for last quarter, down 5.18 per cent YoY and 1.38 per cent QoQ.

ASP Research also revised down its earnings estimate for listed companies. This year’s EPS growth projection is cut from 7.7 per cent to 1.9 per cent. Next year’s EPS growth is pegged at 15 per cent. The profit cut has boosted the current market P/E ratio to a high level of 17 per cent with more risks for investment.

Another issue is the current pattern of stock trading, which indicates feverish speculation.

Individual investors’ share of trading has soared from 53 per cent to over 70 per cent.

Non-SET50 trading is high at 65 per cent of turnover, while the non-SET50 market cap is only 28 per cent the SET’s cap, reflecting high bets on small caps.

The P/E of the SET50 stays at about 16 times, while that of the non-SET50 has jumped to over 24 times.

Based on such observations, the SET has set measures to curb speculation in small caps. However, the measures will take effect in early 2015 and speculation in small caps may continue for the rest of the year. And this makes investment riskier.

Investors should be more cautious with investment and lower their portfolio for short-term speculation. Return to stocks with sound fundamentals and regular dividend payments.

Our picks are KTB ([email protected]), INTUCH (FV@Bt113), STPI ([email protected]), RS ([email protected]) and PTTGC (FV@Bt75).

The SET is expected to move in a narrow range of 1,560-1,580 points. The high market P/E could prevent the SET’s upside. And it’s difficult to see sharp drops in this period, given local investors’ purchases and expectations for LTFs’ buys late in the year.

However, investors should be more prudent with their investment.

Chaiyaporn Nompitakcharoen

Head of individual client research

Bualuang Securities

 

The SET remains in a rut of 1,550-1,600 points as investors wait for solid signs of economic recovery before deciding to add more exposure to the equity market.

Thanks to the massive liquidity flooding the system, investors are willing to hold stocks rather than park their money in either the money market or fixed income market, which yield less-than-generous returns.

Looking forward, we expect this quarter should improve QoQ and YoY due to the low base effect and the plunge into the celebrating season. Note that a drop in oil prices should favour Thailand’s consumption by 0.4 per cent.

So, we believe that the SET should slowly head up to above 1,600 by year-end.

Stock picks are ADVANC, INTUCH, TUF, CPF, BBL, PTTEP, JAS, KTB and SCB.

 

 

Kasikorn Securities

The SET Index last week moved sideways in a range of 1,567-1,587 points. Early of last week, the stock market gained pressure from lower-han-expected GDP growth at 0.6 per centYoY in 3Q14 on concerns over cuts of listed companies's earnings estimate after weaker-than-expected 3Q14 earnings performance. However, Japan's parliamentary dissolving and postponement of rise in sales tax for another 18 months helped prop up the market before retreating on worries over the global economic slowdown after China and the euro zone's PMI figures touched the record low in 6 and 16 months, respectively. Late of the week, the SET Index rebounded on local purchase from the SET In the City exhibition.

Key issues: This week, the stock market will weigh on Thailand and other countries' economic figures. Thai export growth is forecast at 0.1 per cent YoY in October, compared to 3.19 per cent rise YoY in the previous month. this and the BOT's economic figures could draw a picture of slower recovery. However, investment from the SET in the City through local funds and the US and European economic figures that may raise market expectations on the ECB's stimulus measures, if they come out weaker than expected, may help cushion the market retreats and help push the SET Index to test 1,600 points in the next 1-2 weeks.

Investment outlook and strategy: This week, the SET Index is expected to move sideways up on investment from the SET In the City and satisfactory global economic figures and the ECB's stimulus. Thailand's economic figures including October exports announced by the MOC and the BOT's figures will prompt market volatility. The SET Index is estimated to move in a range of 1,560-1,600 points. Thus, focus on accumulating medium and big caps with sound fundamentals and targets for local funds' purchases or institutional investors, who are major players late of a year. Such target groups include banking, energy, communications, food and property and individual stocks with earnings recovery in the latter of this year.

Stock picks: BBL, PTT, ADVANC, LPN, PS and TRT

Technical picks: SOLAR, EA, SAMART