Market View

Thanawat Patchimkul

Head of Research

DBS Vickers Securities (Thailand)

The Stock Exchange of Thailand recovered early this month after dipping into oversold territory when the SET Index fell below the 1,300 level in the last week of August.

The major drivers were the recovery of global oil prices, which influenced heavyweight oil and gas stocks, as well as improving global market sentiment. PTT, PTT Exploration and Production (PTTEP), and PTT Global Chemical (PTTGC) regained some of their losses, which influenced the index’ direction. 

During the market weakness, investors had snapped up key stocks such as CP All (CPALL), Kasikornbank (KBANK), Airports of Thailand (AOT), Bangkok Dusit Medical Services (BDMS), Bumrungrad Hospital (BH), and Advanced Info Service (ADVANC). Foreign investors continued to offload Thai shares, registering a net selling position of Bt89 billion year-to-date. 

Going forward, the Thai market is expected to move sideways; there are no clear catalysts, and the market is sensitive to global events, including expectations for a US interest-rate increase and for oil prices to head up. 

The European Central Bank has cut its growth and inflation forecasts for the euro zone while hinting at further easing to achieve its inflation and growth targets. In short, the ECB wants to see a weak euro, but will Japan stay still if this happens? Probably not. The Bank of Japan could release its ammunition to keep the yen weak, and China may decide to join the currency-devaluation game again. Smaller emerging countries will be in the line of fire – their economies are vulnerable to the global currency turmoil amid excess capacities. 

We continue to recommend that investors accumulate stocks with clear earnings visibility or at bargain levels. Our picks for the Thai market are CK (Ch Karnchang), INTUCH (InTouch Holdings), KBANK (Kasikornbank), QH (Quality Houses) and RATCH (Ratchaburi Electricity Generating Holding). 

For overseas investments, we would recommend accumulating Chimerica ETF (3161:HK) in the Hong Kong stock market on price weakness. Chimerica ETF invests in Chinese companies listed in the US market. Most of them are new-economy stocks, and will be added to the MSCI Emerging Market Index weighting by November. 

Thai investors can buy overseas stocks and ETFs (exchange-traded funds) through their trading accounts with Thailand-based stockbrokers. However, investing abroad entails additional risks, including foreign-exchange risks.

 

Tisco Securities

In line with our expectations, the new Cabinet last Tuesday approved a Bt136-billion economic stimulus package that includes three consumption-boosting measures worth around 1 per cent of gross domestic product aimed at shoring up rural consumption. 

The package comprises Bt60 billion for seven-year loans disbursed through Village Funds with two-year grace periods, Bt36 billion allocated to 7,000 tambon (sub-districts) for construction and repair work, and Bt40 billion to accelerate state budget disbursement for small projects.

We also expect the government to announce a series of measures, including support for small and medium-sized enterprises, to generate credit expansion. Moreover, longer-term plans are also likely to be announced in coming weeks.

As the programme will terminate at the year-end, loans are likely to be taken out fast, with the two-year grace period likely to spur a high participation rate. The loan limit of Bt30,000 per person is aimed at encouraging a wide base of borrowers. Given the small loan amount, most spending is likely to be on small-ticket items. We, therefore, maintain our positive view on staple retailers such as CPALL and BIGC, which are likely to see a direct positive impact.

We also think telecoms could benefit from the stimulus package. With upcountry as a key customer base of ADVANC (Advanced Info Service), improving sentiment and purchasing power in rural areas should generate more mobile phone and Internet revenue. The more active and market-friendly economic team in the Cabinet is also likely to give the green light to the November auction of fourth-generation telecom licences. The auction should benefit both ADVANC and DTAC (Total Access Communication) in terms of improving competitiveness and profit momentum.

Meanwhile the new economic stimulus package is positive for the credit quality of state banks and SME-exposed banks. This should support SETBANK performance vs SET in the second half, especially for KTB (Krungthai Bank), KBANK (Kasikornbank) and TMB, according to our banking analyst Peach Patharavanakul. Note that the banking sector has fallen 21 per cent year to day (underperforming the SET by 13 per cent). Current valuations have reached –1standard deviation (1x price to book value and 9.1x price to earnings 2016F), indicating that the current credit-cycle weakness has been mainly priced in.

 

Trinity Securities, Research Department 

 

The overall investment picture looks better, signalled by consistent inflows of capital, particularly in the futures market. This comes after foreign investors have been closing their short positions. 

The September 16-17 meeting of the US Federal Open Market Committee is expected to leave the Fed fund rate unchanged, and this will attracts capital to flow into emerging stock markets again. 

Thailand’s new Cabinet also has approved a stimulus package for low-income earners as a way to boost spending and domestic consumption. 

The Stock Exchange of Thailand continues to see pressure from analysts’ cuts of listed companies’ profit estimates, and this will prompt the SET Index’ valuation to be more expensive. Thai exports continue to be pressured by the global economic slowdown, currency wars and products that don’t meet the global markets’ demand. In the meantime, commodity-price corrections may not end yet in the global markets if the US and Chinese manufacturing figures come out worse this month.

In September, the SET Index is expected to move in a range of 1,330-1,430 points. Look for investment within this range. 

Stock picks: IRPC, IFEC (Inter Far East Engineering), BLA (Bangkok Life Assurance), TCAP (Thanachart Capital), KKC (Kulthorn Kirby), PTTGC (PTT Global Chemical), VNG (Vanachai Group), WHA, BANPU, IVL (Indorama Ventures), SYNEX (Synnex (Thailand)), SUPER (Superblock), QH (Quality Houses), SCB (Siam Commercial Bank), CEN (Capital Engineering), MCS (M.C.S Steel), TVO (Thai Vegetable Oil), PTT, EVER (Everland).