Target high dividend stocks

Early this year, the stock market’s volatility across the world gave a good test to Thai bourse. The SET Index slightly fell, compared to other stock markets, and better rebounded. At the end of January 2016, it rebounded to stay higher than the closing level at the last year-end (1,288.02 points). The Thai bourse, in the first month of this year, may be one of the top performers in Asia. From now on, the SET Index has a chance to move with volatility for a period, given the following factors. 

Fund flow: The Thai stock market still lacks new investment. From early January to January 28, foreign investors remained net sellers of Thai stocks worth over Bt10 billion. Local institutional investors and proprietary portfolios were net buyers of Thai stocks worth Bt7.3 billion and Bt4 billion, respectively. This indicated that the SET Index had been driven by domestic investment, mostly for short-term trading. When the SET Index stands above 1,300 points, profit-taking could be seen.

Crude prices: This was a key element to move the SET Index with volatility earlier. Crude prices, which last week rebounded, also pushed up the SET Index. However, amid crude oversupply with unclear agreement for lower production, there remains risk for crude prices to be volatile.

Political situation: After a committee to draft the Constitution forwarded the first draft for hearing on January 29, more views on the draft will be seen and this could lead to a campaign to reach a resolution. This will affect capital movement in the Thai stock market. The draft is closely related to the election schedule. 

For long-term investment, the SET Index will provide satisfactory returns. ASPS Research forecasts the SET Index’s 2016 target at 1,466 points. Based on expected earnings per share (EPS) at Bt94.55 for 2016 and targeted market price to earnings ratio (PER) at 15.50 times (from 5 per cent market earning yield gap), stocks with sound fundamentals could be gradually accumulated when their prices fall. Attractive stocks are ones that with outstanding growth in 4Q15 earnings performance and, at the current prices, give high dividend yield. 

Stock picks: 

SC (fair value @Bt4.56): In 4Q15, its net profit will lead to all-time high. It also has policy to make dividend payment once a year. Dividend payment will be made late February. XD sign will usually be posted in late April. Dividend yield, at current price, is 5-6 per cent per year. 

MCS ([email protected]): 4Q15 net profit is expected at Bt180 million, about 1.3 times year on year. Now, its backlog is four years. At the current price, its dividend yield is more than 6 per cent per year. In 2015, interim dividend is Bt0.25 per share and remaining dividend is Bt0.30 per share.

 

Prakit Sirivattanaket 

Vice president

Kasikorn Securities

The SET Index may enter the rally mode, surprisingly running up. The key point is that the market has possibly priced in the old concerns over oil prices, China’s economy and the Chinese yuan. Presently, the SET Index, which is in recovery mode, has a chance to rally beyond 1,300 points to 1,340 points. There are two support factors in the short term. One is the recovery of oil price and another is the likely baht appreciation. 

The Thai currency has strengthened by 1.49 per cent from January 15, to now, the region’s second strongest appreciation after the Malaysian ringgit’s 5.17 per cent. The Singapore dollar appreciated 0.95 per cent, the Korean won 0.82 per cent and the Indonesian rupiah 0.63 per cent.

The Bank of Japan (BOJ)’ s monetary decision could also prompt a shift of Japan’s investment to other markets, boosting liquidity in the system and possibly leading to yen carry trade. BOJ recently decided to maintain its monetary policy with interest rate of minus 0.1 per cent for financial institutions parking money with it. Given currency speculation and BOJ’s monetary decision, the baht is highly likely to appreciate further. The Thai currency was 35.75 per US dollar. It’s not expected to start depreciating easily.

The baht appreciation sent a positive signal on expectations for capital inflow, although there has been no significant net foreign buy of Thai stocks from early this year to now. In the bond market, foreign investors were net buyers worth Bt36 billion for the past four consecutive days. In total, Bt32 billion were in short-term bonds (maturity of less than one year), reflecting currency speculation and foreign investors’ expectation on further baht appreciation. This could boost investors’ expectations of some capital being shifted into the stock market, possibly boosting the SET Index to 1,340 points.