Market Watch

Thanawat Patchimkul
Head of Research
DBS Vickers Securities (Thailand)
What to do during periods of a strong baht and sluggish SET?
Global markets last week were hit by poor sentiment as widespread US political discord and the terrorist attack in Barcelona gave rise to fresh investor concerns. It seems that the US President is facing increasing problems with his own advisory council members as well as Republican Party members. Trump policies are likely to face diminishing support.
However, without any major progress on reforms, the US economy is still growing at a decent pace. DBS economists expect US GDP growth of 2.2 per cent this year and 2.5 per cent next year, even without the successful implementation of reforms.
The USD’s performance is a gauge of investor confidence in the US economy. Yeartodate, the USD index has given up most of the gains made in 2016, when investors started to expect Trump’s fiscal policy to have an inflationary impact and the Fed signalled the need to accelerate the pace of interest rate normalisation. Apparently, the hope has now diminished to a great extent. The Thai baht, therefore, has appreciated rapidly against the USD this year and is among the top YTD performers in Asia. An exuberant baht offers a good opportunity for Thai investors to snap up overseas stocks, particularly USD denominated ones. We like “Manulife US REIT”, a USD-traded stock listed in Singapore. The counter offers a prospective dividend (tax-free) yield of 7.0 per cent in 2017, with a strong likelihood of rising to 7.7 per cent in 2018 and 8.0 per cent in 2019.

Tisco Securities
The SET continues to remain range-bound at 1,560-1,580 and we expect more of the same over the next few weeks, as news flow is likely to remain neutral to negative. On Wednesday the MPC maintained its policy rate at 1.50 per cent, as widely anticipated, and we now expect market attention to turn to the NESDB’s release of 2Q17 tomorrow. TISCO’s economic team expects 2Q17 GDP to come in at +3.2 per cent YoY (vs. +3.3 per cent previous, +3.3 per cent consensus), or expanding by +0.9 per cent QoQ after seasonal adjustment. Other key factors to watch are:
Yingluck verdict: The Supreme Court will announce the ‘final’ verdict on the rice guarantee case against former Prime Minister Yingluck Shinawatra next Friday (August 25). We expect to see limited backlash from her supporters in the event of a guilty verdict, as Yingluck should be able to appeal (thus kicking the final, final verdict a few more years down the road).
Floods threat: Floods and heavy monsoon rains have already ravaged many provinces in the Northeast and South and there are warnings of another round of flooding due to storms expected to develop in the Indian Ocean and Andaman Sea. The Northeast has been the worst hit area so far with 1.7 million acres (688 hectares) of rice-growing land affected and estimated damage of US$300 million. On the flip side, natural disasters could prompt the government to introduce new stimulus packages at year-end.
2Q17 earnings: Core 2Q17 earnings for most companies under our coverage were more or less in line with our forecasts. Energy results came in above consensus and we believe the recent recovery in crude oil prices points to better earnings prospects for the sector in 3Q17.
We continue to stick with our defensive calls as well as stocks with company-specific catalysts. We have dropped INTUCH and KTB from our top picks list. Our model portfolio now consists of AOT, DIF, GLOW, EGCO, CPALL, BBL, CK, SCC, UNIQ and AP.
Research Department
Trinity Securities
Politics: The most important local issue is the August 25 ruling in the Yingluck case, which could affect investment sentiment more on local investors, particularly institutional ones. 
Jackson Hole: The most important external issue is the annual economic meeting which will be held by the Fed of Kansas City in Kansas City from August 2426. 
Investment strategy: The SET Index is expected to move with more volatility this week, given significant local and foreign factors. This is a good chance to sell on strength and buy on weakness if the SET Index sharply swings into one direction. However, if the SET Index swings in the midpoint of 1,5401,600 points, focus on these following groups:
Utilities: our top picks are BCPG and WHAUP for growth potential. Stocks with a high dividend yield and expected interim dividend are GLOW, EGCO, RATCH.
Banks for hire purchase: our picks are KKP, TCAP and TISCO due to their high dividend yield. The ratio between SETBANK / SETENERG is now low, which prompts a limited downside risk in the banking sector when compared with the energy sector.
Expor-trelated groups whose stock prices reacted negatively against the baht appreciation and valuations are at a proper level. These groups include electronics (HANA, KCE) and food (CPF, TU).