MarketWatch

Therdsak Thaveeteeratham
Executive Vice President – Research
Asia Plus Securities Co

Several external developments have pressured the world’s major stock markets including the Stock Exchange of Thailand. These ranged from concerns over trade barriers by the United States to political developments that could lead to exits from the European Union, conflicts in Syria and Afghanistan, and risks of unrest in the Korean Peninsula. 
There arose two types of impacts: sentiment for some investors to reduce their stock holdings, and capital that should have flowed into the markets shifting to less risky assets.
After its peak at 1,589.50 points on April 12, the SET Index dropped, but not in sharp moves, likely thanks to the strength of the stock market’s fundamentals. Based on valuation, the SET Index currently has a PER (price-to-earning ratio) lower than 15.50 times, proper for investment, which prompt stock prices to sustain their value.
This week will see developments in the Korean Peninsula, a presidential election in France, and movements in US tax policy. Among these, the US tax cuts seem to provoke the most positive sentiment. If there is certain progress on US tax policy this week, it could help boost the stock markets. 
In this country, attention is paid to listed companies’ financial results, which have gradually been announced. In the first quarter of 2016, listed companies recorded combined net profit of Bt234 billion. Extraordinary items worth about Bt16 billion were found in the ICT (information and communications technology) group, arising from Bt13-billion asset appraisal of DIF (infrastructure fund). If there are no big extraordinary items in 1Q17 and listed companies record combined net profit of Bt230 billion or higher, this will be regarded as strong performance. 
In regard to capital movements, we believe there are no signs of inflows into Thailand, given relatively high foreign-exchange risks in light of relatively high uncertainties of the current external situations and sharp appreciations of the baht in the past month. The baht appreciated from 35.40 per US dollar during March 9-10 to 34.40 now. 
This week, the SET Index is expected to move in a range of 1,560-1,585 points. Selective buys are recommended. Stock picks: SCC (Siam Cement; fair value Bt610) for an expected new high of 1Q17 performance from gains from sales of investment and outstanding profit in petrochemical business; and RS ([email protected]) for a sign of profit turnaround in 1Q17 with expected higher profit in the next period.

Prakit Sirivattanaket
Vice President 
Kasikorn Securities

Last week, the US dollar Index rebounded to 99.82, while the euro and pound sterling depreciated slightly. The dollar may come to a turning point again on expectations for President Donald Trump’s policy implementations after statements that the government was about to declare big tax-reform measures.
The tax-cut issue has returned, although markets continue their cautious mood over delays and risks for sanction in the US Congress. However, this is positive for US stock markets after geopolitical risks for the US, Syria and North Korea throughout last week. 
Concerns over these geopolitical risks will likely ease and safe-haven assets have been sold. US 10-year bond yield rose from its five-month low of 2.17 per cent to 2.24 per cent. Similarly, Japanese 10-year bond yield rebounded from its five-month low of 0.01 per cent to 0.02 per cent. Thai 10-year bond yield climbed from 2.60 per cent to 2.65 per cent.
If markets expect easing tensions over geopolitical risks, safe-haven assets could be sold consistently and the baht will likely begin depreciating again. Besides, the baht may face risks from US dollar buybacks as markets anticipate the May 2-3 meeting of the Federal Open Market Committee, which may signal a US interest-rate rise in June and a balance-sheet cut after claims for state unemployment benefits fell continuously to a 17-year low. These will be risks to the baht, which may face profit-taking, which could be a factor for capital outflows.
So far, there have not been clear signs of capital outflows. Foreign investors have not net-sold much in the capital markets (four consecutive days for Bt3.21 billion). Similarly, foreign investors just net-sold Bt1.61 billion in the bond market after two-day purchases of Bt8.36 billion. However, if the US dollar appreciates during this period, it could be at a gradual pace, as the euro and pound sterling continue confronting purchase for speculation on expectations for elections in France and the United Kingdom.