Market Watch

Sticking to ‘laggard fundamentals’ themes

The SET index has already surpassed our 2017 target of 1680 and is now trading at a demanding PER of 16x for 2018. In the short term we expect the SET to trade in a range of 1680 to 1730, with a possible upside coming from target price upgrades after 3Q17 results are announced. For both financial and non-financial companies, market consensus expects robust results, with projected growth of more than 20 per cent YoY and more than 10 per cent QoQ.
Although bank earnings were not that impressive, we have recently revised up our earnings forecasts and target prices on several bank stocks. In particular, we have upgraded KBANK to BUY with a 14 per cent higher target price of Bt240/share based on two main factors: 1) the ongoing economic recovery will gain pace in 2018, and 2) this will lead to better SME asset quality and loan growth. Our top pick in the sector, however, is TMB, where we recently raised our TP to Bt2.90/share.
As well as 3Q results, upbeat macro data could also support market sentiment for the remainder of the year. Exports posted strong growth of more than 12 per cent YoY for September, prompting the Commerce Ministry to revise up its 2017 export growth foreฌcast to 8 per cent from 7 per cent. Meanwhile, domestic car sales surged by 22 per cent YoY in September.
We continue to stick with our “laggard fundamental” themes and believe SCC, INTUCH and DIF as well as select contractors (CK and UNIQ) have a good chance of outperforming the market in the nearterm. We also recently added LH to our model portfolio as another laggard play.Research Department 
Trinity Securities
This week will see the following interesting issues.
The ECB meeting’s results are a QE reduction by 30 billion euros starting from next January, extension of QE to next September and the benchmark rate kept on hold at 0 per cent. We see these results as more dovish than market expectations and this promoted fast EUR depreciation to touch a three-month low and, automatically, USD appreciation.
USD continuously appreciates on three factors, including longer than expected ECB monetary easing, progress on the US tax reform policy and a higher possibility for John Taylor to be selected as the new Fed chairman. Our view is that capital in the Thai bourse to likely to slow down in the short term. Local investors, particularly institutional investors, will help sustain the stock market this time. 
The depreciating baht will give positive sentiment toward the electronics group. We overweight the electronics group in the medium to long term due to changes in the megatrend of the global automobile market and growing smartphone sales following the replacement cycle. The increased copper price is seen as negative in the short term and tends to fall in the next periods after the end of speculations in the futures market. The US tax reform measure is expected to promote the USD to appreciate in the next periods. Buy “HANA” for short-term investment at a targeted price of Bt50 and “KCE” for long-term investment at a targeted price of Bt104.
Investment strategy: High market valuation continues to limit the SET Index’s upside. Thus, investment should be made with a selective strategy. In the short term, interesting groups include banking, hire purchase, auto parts and bulk cargo ships. In the long term, interesting groups are electronics and industrial estate.