Index likely to fluctuate around 1,600 points amid volatility

Fundamentally, the Bank of Japan, the US Federal Open Market Committee (FOMC) and the Bank of England are not expected to implement further monetary easing or money injection at their upcoming meetings. The FOMC meeting should be monitored on whether or not the US interest rate will be raised, as most US economic indicators reflect a certain recovery. 
Last month, the US inflation rate was 2.1 per cent and looks like accelerating consistently, particularly as the new US president’s economic policy is implemented. The current US benchmark interest rate is 0.75 per cent, which means that the real interest rate is minus-1.35 per cent, and that may not be in line with the current US economic situation. The Fed is expected to raise its rate three times in eight FOMC meetings. The point is in which months the US rate will be increased. We believe the increases will be seen in the latter half of this year. 
The expected interest-rate rises could prompt the US dollar to appreciate and become an obstacle for capital to flow into the Stock Exchange of Thailand.
In Thailand, aside from the continuously launched fiscal stimulus measures, the period from now to February will feature announcements of last year’s earnings performances. We expect the fourth quarter of 2016 to see the listed companies’ total net profit of about Bt210 billion, close to the 3Q16 figure but up 27 per cent year on year. 
In 4Q15, special items were booked that resulted in a lower-than-normal base in the quarter (Bt165 billion). 
If the 4Q16 figure is as expected, listed companies’ combined full-year net profit will be Bt883 billion, or Bt92.52 per share. Overall, it’s believed the earnings performance will be as expected and there is unlikely to be significant changes in the SET Index. 
This year is expected to see the listed firms’ net profit total Bt952 billion or Bt99.78 per share, a 7.85-per-cent rise year on year. This year, the targeted PER (price-to-earnings ratio) is 16 times and the targeted SET Index is 1,600 points. Another point for consideration is support from local institutional and foreign investors to determine the SET Index’ direction. Local institutional investors’ purchases of stocks have been inconsistent, likely because of the lack of new capital flowing in. At close to 1,600 points, some LTF (long-term equity fund) holders who bought the units in 2013 at the weighted average cost at 1,500 points may take profits. 
There have been some purchases from foreign investors, but at the same time, they opened short positions in futures. Therefore, foreign purchase may not be a strong driver of the SET Index. 
In conclusion, we expect the SET Index to be volatile at around 1,600 points this week. If the gauge rises to 1,600 points or higher, there will be a chance for profit-taking. If it falls to 1,580 points or lower, there could be purchases for speculation. Stock picks: Laggard stocks like SCB (Siam Commercial Bank) or dividend stocks like LH (Land and Houses), ASK (Asia Sermkij Leasing) and TCAP (Thanachart Capital).

Prakit Sirivattanaket
Vice President
Kasikorn Securities
The SET Index has risen consistently, led by big caps – from energy – PTT; refineries – TOP (Thai Oil); petrochemicals – PTTGC (PTT Global Chemical); communications – ADVANC (Advanced Info Service) and INTUCH (Intouch Holdings); banks – BBL (Bangkok Bank); and construction materials – SCC (Siam Cement). Big caps rose while mid and small caps fell, reflecting limited capital in the stock market and its concentration in big caps. No new money was in the market, as seen from market slowdown and net foreign sales for eight or nine of the past 10 days. 
Big caps will likely continue to be on the scene with laggards in the SET50 that see upside of over 10 per cent and tend to have outstanding fourth-quarter and full-year 2016 performances. These stocks are: BANPU, GLOBAL (Siam Global House), CPN (Central Pattana), BH (Bumrungrad Hospital), BDMS (Bangkok Dusit Medical Services), ROBINS (Robinson Department Store), CPALL and PTTEP (PTT Exploration and Production). Although PTTEP has been impacted by special items, its price is expected to rise, following PTT.
Stocks that will likely see outstanding rises in their 4Q16 and 2016 performances with upside for short-term speculation: retail – BIG (Big Camera Corporation), MEGA (Mega Lifesciences), BEAUTY (Beauty Community), HMPO, GLOBAL, IGC, BJC (Berli Jucker), CPN and CPALL; construction – TTCL, ITD (Italian-Thai Development) and CK (Ch Karnchang); food – TKN (Taokaenoi Food & Marketing); construction materials – SCCC (Siam City Cement) and SCC; hospitals – BDMS, BH, CHG and RJH (Rajthanee Hospital); property – AP and SPALI (Supalai); and energy – PTT and BANPU.
There is a good chance to collect mid and small caps before likely rises when their results are announced from the middle of February. Stock picks: BIG, MEGA, BEAUTY and CHG (Chularat Hospital).
In the short term, big caps that are expected to report good results are BANPU and PTT, while a large cap that remains highly laggard is PTTEP. Top picks: MEGA, BEAUTY, BIG and CHG.