SET to see less upside space in the short term

In the first half, net profit amounted to Bt478 billion, up 8.3 per cent year on year, and accounted for 56.6 per cent of this year’s estimated net profit of Bt844 billion or Bt88.67 per share. 

Our analysts revised up this year’s estimated net profit to Bt862 billion or Bt90.29 per share. 

The industries with a large profit base have the following issues for consideration:

Commercial banking: Net profit is forecast at Bt189 billion for the whole of 2016. In 1H16, this sector’s net profit fell 5.6 per cent year on year to Bt98.2 billion on pressure of higher loan-loss provisions to Bt78.5 billion. Loan growth was 3.2 per cent, while net interest margin was stable at 3 per cent. In 2H16, loan growth and NIM are not expected to see significant changes. However, the key factor is loan-loss provisioning, particularly in 4Q16, depending on each bank’s policy.

Energy: Net profit is expected at Bt176 billion for 2016 with a 2.4-per-cent rise year on year in 1H16 net profit to Bt109 billion. The overall performance was not different from the same period of last year. However, in 2H16, net profit is expected to take a leap from 2H15, given its low profit base from records of asset impairment in PTTEP’s oil business and several companies’ inventories. 

Information and communications technology: In 1H16, ICT’s profit was extraordinarily high at Bt54.5 billion as the Digital Telecommunications Infrastructure Fund (DIF) made a higher asset appraisal with extraordinary profit of Bt13.5 billion. TRUE holds a 28.11-per-cent stake in DIF and recorded its profit proportionately, while the cost of its licence to a fourth-generation-compatible telecom spectrum has not yet been fully recorded. In 2H16, there will be no records of extraordinary items. On the contrary, big operators like ADVANC (Advanced Info Service) and TRUE will start fully recording their 4G licence costs. Thus net profit is expected to be low compared with 1H16. Apart from listed companies’ earnings performance, fund flows are another key issue. From February 15 to August 25, foreign investors’ accumulative net purchase totalled Bt126 billion for weighted average cost at the SET Index of 1,450 points. 

 The SET Index will see less upside space than downside in the short term. Therefore, take more caution for investment or speculation. Pick stocks with certain positive factors. 

Stock picks: PACE (fair [email protected]) and TFG (Thaifoods Group; fair [email protected]).

 

Chaiyaporn Nompitakcharoen 

Head of Non-Institutional Broking Group

Bualuang Securities

The Stock Exchange of Thailand ended the week of August 22-26 at 1,549.41, up 10.65 points (0.69 per cent) week on week. We anticipate that the market is likely to face selling pressure this week for the following reasons: 

First, investors will be jittery over the market valuation, as price-to earnings ratio is nearly at a decade-high level. 

Second, it is likely that oil prices will come under pressure as a strengthening US dollar will make crude more expensive for holders of other currencies. 

Third, there is risk of fund-flow reversal amid a market with toned up talk of US interest-rate increases, pricing in a 50-per-cent chance of a rate rise this year, up from 10 per cent a month ago. 

Fourth, global economic growth will continue to face headwinds from subdued commodity prices, rising geopolitical risks and financial stresses. 

Based on such higher risk conditions, we recommend investing in defensive/ low-beta equities such as BDMS (Bangkok Dusit Medical Services), BLA (Bangkok Life Assurance), RATCH (Ratchaburi Electricity Generating Holding), TTW, and FUTUREPF (Future Park Leasehold Property Fund).

 

Prakit Sirivattanaket

Vice President

Kasikorn Securities

It now is more likely that the US Federal Reserve will raise its interest rate next month. From now on, there could be more speculation in the US dollar that will move risky assets, particularly commodities, with volatility.

KS Research estimates that the September meeting of the Federation Open Market Committee will decide a rate rise, as the US presidential election will take place in November and risks to the economy could heighten in December.

There is also a chance for the Fed to increase its rate after the US dollar has stayed low for several months against the yen. 

This week, the August 31-September 2 “Thailand Focus” conference should be monitored on expectations for foreign investors’ positive response after Thai listed companies’ strong earnings performances and a more certain election schedule. That could prompt a large amount of foreign capital to flow into the Stock Exchange of Thailand. 

Statistically, in nine previous Thailand Focus events, the SET Index rose during the conference.