Political factors affect sentiment

After the SET Index rose to its all-time high at 1,848 points on January 25, profit-taking dragged it down to below 1,820 points on the same day due to normal market corrections and investors’ concerns over a possible postponement of Thailand’s general election to the first quarter of 2019. We believe that the political impact will be short-term for the SET Index.
Another factor for monitoring is the depreciation of the US dollar which tends to weaken further. There could be movement of financial assets from the US$ to other currencies expected to appreciate.
The baht is also another option, given its continuous appreciation. Meanwhile, capital flows to Thailand were centralised in the bond |market and, as a result, bond |yields dropped to low levels.
The gap between the expected return on the stock market and bond yield has widened. From now to the end of this year, we expect the yield gap to be higher than 4.8 per cent and, thus, more capital is expected to move into the stock market if there are no issues to pressure investment sentiment.
This week, the SET Index is forecast to continue its moves with volatility and narrower downside risks as the local political pressure was priced in. Based on the current investment theme, we weigh on stocks with high dividend yield.
These stocks are considered as safe havens amid the market volatility. Stock picks are SIRI , SC, IRPC and MAJOR.
 
PRAKIT SIRIVATTANAKET
Vice President
Kasikorn Securities
 
Given market concerns over the general election, which will be postponed from November 2018 to February-March 2019, the SET Index fell 1.07 per cent.
We see that it’s not necessary for the Election Commission of Thailand to take up the whole preparation period of 150 days to hold an election. If the EC is ready, the preparation period may be less than that determined in the Constitution.
On January 25, the SET Index initially rose 0.5 per cent and, then, dropped 1 per cent on the postponement of the general election. This is the opportunity to collect big caps which move in line with the global economic expansion, and the Thai economic growth or stocks with outstanding performance in 4Q17 and likely consistent growth in 2018, as well as stocks with high dividend yield. Stock picks: banks – BBL, TISCO; energy – PTTEP; petrochemical – SCC, PTTGC, IVL; property – SC, SPALI, ORI; retail – CPALL, ROBINS; and construction – STEC, CK.