MarketView

  Therdsak Thaveeteeratham
Executive Vice President for Research
Asia Plus Securities

Foreign investors have continued to be net buyers of Thai stocks.
From the beginning of the year to July 28, accumulated net foreign purchase was Bt80.3 billion. From February 15 to July 28, accumulated net foreign purchase was Bt94.8 billion. The weighted average contribution of foreign investors in this round (February 15-July 28) is reflected in the SET Index at 1,439.45 points. Combined with the SET Index’ rises, the market value foreign investors net-bought from February 15 until now was around Bt100 billion, equivalent to yield of 5.6 per cent. Combined with foreign-exchange gain from the baht’s appreciation, the overall yield rate could be about 7-8 per cent.
The SET Index’ rise could push market PER (price-to-earnings ratio) this year-end to 17.20 times. Compare that with the SET Index’ mid-2013 peak at nearly 1,650 points: the PER at the end of 2013 was 18 times. At that time, foreign investors had gradually accumulated Thai stocks since the beginning of 2009.
From 2009 to 2013, accumulated market value of net purchase stood at Bt46.5 billion. Given fast trade of fund flows in this round, accumulated purchase was much lower than the previous ones. Therefore,It is difficult to see PER going up to 18 times. With the current PER in the upper limits, the Stock Exchange of Thailand faces higher risks.
Investors who have stocks in their portfolios should adjust their portfolios.
Sell stocks whose prices rise to their fair values on a fundamental basis. Set a stop-profit point and make it higher if the SET Index increases. The stop-profit point should be 0.5-0.6 per cent lower than the SET Index.
If investors want to select stocks for their portfolios, screen safe stocks whose prices remain lower than their fair values. Their second-quarter earnings performances tend to grow highly, while interim dividend payment is expected. Importantly, their prices remain laggard in comparison with other stocks in their groups or the SET Index.
Stock picks are as follows.
PS (Pruksa Real Estate; fair value at Bt38): Second-quarter profit is expected to grow 50 per cent quarter on quarter on stimulus measures in the property market and promotional campaigns. At the current price, the dividend yield is forecast at 6.4 per cent per year with an interim dividend payment after the announcement of 2Q16 earnings performance.
MCS (M.C.S. Steel; FV at Bt17.19): The amount of steel structure work delivered has grown highly, while the Japanese yen’s appreciation helps improve profitability. Its operating profit (excluding hedging FX loss) is estimated to grow 37 per cent quarter on quarter.

Chaiyaporn Nompitakcharoen
Head of Non-institutional Broking Group
Bualuang Securities
The Stock Exchange of Thailand gained 5.4 per cent month on month (excluding dividends) as monetary policy around the world remains in favour of equity markets.
Asean markets have performed the best in Asia given the strong commitment of governments to invest a huge amount of money in infrastructure projects over the next five to seven years.
Despite moderate economic growth of around 3 per cent expected for 2016, risk of the Thai economy faltering appears relatively small.
Excessive liquidity in the financial system should become a key driver for stock markets.
We expect that the US Federal Reserve will hold its policy interest rate at a low level until next year while there are many uncertainties in political and economic factors lining up around the world in the second half of 2016.
In conclusion, my view is positive on the Thai stock market, with a major resistance level at 1,600 points.
Prakit Sirivattanaket
Vice President
Kasikorn Securities
The results of the July 27 US Federal Open Market Committee meeting were as markets expected. The results are the following. The FOMC voted 9-1 to keep the federal funds rate unchanged at 0.25-0.50 per cent. Esther George voted for a rate increase. The Fed took the view that the US economy would grow at a medium level, while the US labour market will expand robustly. US household spending will improve and consumer confidence remains high.
According to the Fed, US inflation is expected to remain low in the short term because of drops in energy prices. However, in the medium term, inflation is expected to move up to its 2-per-cent target.
Monetary-policy change is subject to labour-market recovery, inflation and other economic data. The Fed insists on raising its rates at a gradual pace.
The Fed leaves room for a rate increase, stating that short-term risks to the US economic trend have eased.
Reinvestment in bonds, debentures and mortgage-backed securities will continue.
Despite the Fed’s signal on improvement of the US economy and easing concerns over Brexit, markets do not yet expect a US interest-rate increase in September. This is reflected in fed funds futures, about 26 per cent of which point out probability of a rate increase in September, 28 per cent in November and 45 per cent in December.
In a Bloomberg survey, 58 of 75 economists forecast the Fed maintaining its rate in September and 52 of 70 economists projected that the Fed would leave the rate unchanged in November. However, 50 of 70 economists forecast the US rate rise in December.
We expect there remains a possibility that the Fed will raise the rate in September before the US presidential election in November.
Meanwhile, the Bank of Japan on July 29 decided to enlarge a programme of buying exchange-traded funds to 6 trillion yen and kept the policy interest rate unchanged at zero. This means that global interest rates will tend to slow or end their downward trend, which could prompt rebounds of yields on other government bonds.
Thailand’s 10-year government bond yield has a chance to go up to test 2.2 per cent. This will be positive for BLA (Bangkok Life Assurance).