More support needed to drive SET above the 1,600-point mark

Based on the current environment, if the SET Index climbs to 1,600 points or higher, consistent and sufficient support is required. 
It’s believed that there is little capital flowing into the system from local institutional investors. To the contrary, it’s more likely to see capital flowing out as a result of sales of long-term equity funds (average weighted cost of purchases made by LTFs, in 2013, was at the SET Index of 1,501 points). 
Last week, local institutional investors became net sellers. 
Foreign investors are expected to see constraint in valuation. The Stock Exchange of Thailand’s PER (price-to-earnings ratio) is close to the upper range at 16 times (based on market earnings gap at 4.75 per cent), while the expected return is relatively narrow. Foreign-exchange risks are heightening amid the appreciating baht at lower than 36 per US dollar. Such situations will likely prompt thinner support from foreign investors.
In regard to fundamental support, there do not seem to be new positive factors for the rest of this month. External factors focus on the incoming US president Donald Trump and his economic policies. This issue goes relatively into the negative side, which could move the world’s money markets with volatility. 
In Thailand, the main interest is the fiscal stimulus through the government’s mega-projects and money injection through household consumption. Recently, the government set a deficit budget for fiscal 2018. Its planned expenditure is Bt2.9 trillion with a planned deficit of Bt450 billion. Thus the fundamental factor has not yet provided adequate support to drive the SET Index.
This week, the SET Index is expected to be volatile in the upper range, both fundamental and technical resistance, of 1,580-1,600 points. Its upside is relatively limited. 
The strategy focuses on stocks with high dividend yield like LH (Land and Houses), SNC (SNC Former), SPALI (Supalai) and ADVANC (Advanced Info Service). 
On trading, pick stocks with sound fundamentals and positive specific factors like WHA. WHA is expected to report satisfactory performance in the fourth quarter of 2016 and its subsidiary WHAUP (WHA Utilities and Power) will be listed on the exchange.

Prakit Sirivattanaket
Vice President
Kasikorn Securities

The baht recently appreciated to 35.37 per US dollar. The Thai currency appreciated 0.86 per cent for the whole of last week, the third-strongest in Asia after the Taiwan dollar’s 0.95 per cent and South Korean won’s 1.11 per cent. 
From the beginning of this year, the baht appreciated 1.18 per cent, the fifth-strongest after the Taiwan dollar, South Korean won, Japanese yen and Singapore dollar. The baht’s appreciation last week came from profit-taking on the US dollar after about 10-per-cent appreciation during November and December 2016.
The appreciating baht has enticed capital to flow in. However, this was relatively highly factored in, as seen from a 26-per-cent drop in trading turnover on the Stock Exchange of Thailand to Bt48.5 billion, the lowest since the beginning of 2017. The SET Index recently dropped, reflecting the lack of any new factors to drive the stock market and a chance for it to take a rest.
We see the baht appreciation and fund inflows as short-term positive factors as the US dollar is expected to continue its upward trend on strong US economic expansion, interest-rate rises, higher inflation and incoming president Donald Trump’s fiscal |policy. 
The dollar is expected to see repurchases and profit-taking when as Trump’s inauguration approaches, which will become a negative factor and trigger profit-taking in emerging markets.
Trump has revealed some of his proposed administration team, several of whom have successful business records. 
This is expected to boost confidence in the US economic direction and prompt speculation on the US dollar consistently. Simultaneously, other regional currencies will be pressured.
Besides, the US Federal Reserve’s monetary tightening differs from the European Central Bank’s monetary easing, with the Fed’s quantitative easing ending next December. The different monetary policies will pressure the euro to depreciate along with other currencies, including the baht.