Marketwatch

Thanawat Patchimkul
Head of Research
DBS Vickers Securities

According to a DBS Bank report on economic and strategy, the global economic momentum will lose steam. Trade wars, rising commodity prices and policy uncertainties are among other reasons to blame. The recent evidence in the manufacturing sector across the region suggests that exports have already reached their peak and could soften. In Asia, a major global electronics supply chain – such as China, Malaysia, Singapore, South Korea, Taiwan and Thailand –  might see their exports weakened in the latter half of this year.
Meanwhile, the Fed minutes released last week cited the solid growth of the US economy and labour market. The Fed believes that the US economy will continue to grow beyond its natural growth rates during 20182020 given the benefit of fiscal stimulus. Nonetheless, the Fed said key risks to their estimates are the trade policy, which could negatively hit business sentiment, and slow investments.
In Europe, Italy is a major risk factor. The new Italian government insists on tax cuts and increased social spending. As a result, Italy government debt will rise further from the current 132 per cent of GDP, the peak level seen during the past four consecutive years. On top of that, Italian banks’ NPLs remain at 13.5 per cent of their loan book.
We foresee increasing market volatility in the coming months. Investors should focus on domestic plays.
 
Tisco Securities

Despite further negative news on the global trade war, there are tentative signs that foreign investors are slowing their selling and that local funds are beginning to accumulate stocks given their more appealing valuations. We also expect the baht to soon stabilise, which should lend support to a 2H SET index recovery.
However, a market upside is likely to be capped by the start last Friday (July 6) of US tariffs of 25 per cent on 818 Chinese products worth US$34bn (Bt1.12 trillion). China is widely expected to retaliate in kind despite President Trump’s threat to impose additional tariffs on Chinese goods.
We note that many of our model portfolio stocks in the commerce (CPALL, BJC), banking (KBANK, BBL) and contractor (CK) sectors have performed relatively well in the stock market downturn, and we expect them to continue to outperform. 
At our recent commerce corporate day in Bangkok, ROBINS, BJC, and CPALL predicted weaker 2Q18 SSSG, with flat/negative for ROBINS and BJC and +23% for CPALL, due to heavy rains. However, all three companies are more positive on May/June data as they have started to see signs of a consumption recovery, and thus a better outlook for 2H18. This could provide an additional boost for CPALL and BJC in 3Q18, aided by news that Thailand’s Consumer Confidence Index hit a fiveyear high in June.
In the Thai energy space we have raised our 2018F earnings for IVL by 2 per cent and trimmed them for IRPC by 5 per cent to reflect changes by Deutsche Bank’s petrochemicals team on HDPE, LDPE and LLDPE spread assumptions this year. To reflect our more cautious outlook on PE in 2H18, we also revised down our 2018F earnings for PTTGC and SCC by –4 per cent and cut their target prices to Bt100/share (from Bt116/share) and Bt517/share (from Bt586/share), respectively.

Research Department
Trinity Securities
The SET Index is expected to rebound to 1,650 points on expectations for big caps’ rebounds. Meanwhile, listed companies’ 2Q18 earnings performance will be the key to whether the SET Index will rise to 1,700 points.
•     Positive factors for the market rebounds include:
1 No significant factors expected to pressure the stock market in July, apart from the trade wars which were already factored in. If there are positive surprises, positive sentiment is expected to global stock markets.
2 Thai stock market’s forward market PE at 13.3 times is highly attractive in term of valuation.
3 Big caps’ estimated EPS have been raised in contrast with their price drops. Their PEs, thus, are cheaper and these big caps are expected to rebound first.
4 SSF’s Open Interest (OI) has dropped to its low, indicating sales from nearly end of block trade’s unwinding position.
5 Other positive factors include sustained high crude prices after concern on possibility of lower crude supply after the US announced sanction against Iran.
•     Thai stock market is expected to gain support from local institutional investors for the following reasons:
1 Local liquidity remains high, reflecting from the monetary base growth at 5 per cent per annum.
2 Local interest rates remain low, which will entice people to move more money out of deposits to equity mutual funds due to their attractive returns.
3 There are signs to launch trigger funds.
•    Investment strategy: overweight stocks for those who hold cast at morethanusual level on hopes for market rebounds to 1,650 points at least this month or 1,700 points if earnings performances come out better than expected. Stock picks in SET50: SCC, BANPU, TRUE.
The worst case is the downside at 1,550 points, based on current PE of 14.1 times.