Marketwatch

The outlook for 2019 is less than promising. Currently we are in the midst of a market correction with oil prices collapsing, concerns over the trade war and weakening of the economic indicators. 
 DBS views that the labour market and domestic demand dynamics in the US would keep the Federal Reserve (Fed) on the path of quarterly rate hikes. The European Central Bank (ECB) and Bank of Japan (BOJ) should keep their policy rates unchanged in 2019 but are expected to move away from monetary easing. Other central banks may adopt a waitandsee approach instead of following the Fed.
 The third-quarter gross domestic product (GDP) growth  of Asean nations were pretty much below expectations and economists are lowering their growth forecasts for Singapore, Thailand and Malaysia. 
 Despite slowing growth, Asean countries have shown greater stability in recent weeks. Indonesia’s bond yield came down quickly as the rupiah strengthened, thanks to the return of foreign funds. The Philippine peso also rose from its lowest levels in over 10 years as inflation peaked. Malaysia’s forฌeign reserves increased slightly after a sizeable decline earlier this year. Thailand is pretty much stable in most aspects and continues to enjoy fund inflows from the bond market. – Thanawat Patchimkul, Head of Research, DBS Vickers Securities (Thailand). 

GDP forecast uncertain 

The Thai stock market fell last week after report of the below-forecast GDP growth of 3.3 per cent for the third quarter, amid the ongoing trade war and the decline in Chinese tourist arrivals in Thailand. Estimates for Q3 GDP growth was set at over 4 per cent. 
 Tisco may lower Thailand’s GDP growth forecast for this year from 4.4 per cent. 
 The major factors this week are the release of manufacturing production figures tomorrow and the Bank of Thailand’s economic data on November 30. We expect the Thai bourse to move sideways and sideways up. The major support level is 1,5951,600 points and the resistance level is 1,635 points. 
This week’s investment strategy: 
 The SET Index made corrections last week to test 1,600 points again after being pressured by weaker-than-expected local economic situations (3Q GDP and October's unsatisfactory tourism figures) and the weak global economy.
 Meanwhile, we see the Thai stock market starting to build up its base at about 1,600 points +/ and could rise in December. Launches of long-term funds and retirement mutual funds are also expected. We recommend stocks with limited downside and stable growth potential such as GULF (5 per cent drop monthtodate in stock price and inclusion in MSCI – effective at the end of this month) and GUNKUL (stock price has not factored in the future performance of its new power plant .) Existing stocks in our portfolio – JWD and MTC have cut losses last week but we suggest holding on to BTS and CENTEL due to their resilience to market downtrend. 
 Stock picks:
  GULF, technical fair price at Bt78.00
 GUNKUL, technical fair price at Bt3.24.
  Tisco Securities

Volatility ahead 

The SET Index is expected to swing in a range of 1,5901,650 points for the rest of this month. At about 1,600 points, the stock market has attractive risks/rewards for investments.
 We expect the first worstcase of the SET Index at 1,595 points as at this level, its earning yield gap goes to the long-term average.
 We prefer these groups for overweight this time.
1) Retail: CPALL, ROBINS, HMPRO for more good signals in domestic consumption.
2) Auto parts: SAT for the sharp drop in prices as a result of a selling spree in Nissan automobile group across the world in response to the charges against its former chief executive Carlos Ghosn.
3) Energy: PTT, PTTEP for more upside than downside risks in global crude prices.
 We avoid these groups.
1) Tourism-related businesses: airport, airline, hotels, firms offering products and services related to Chinese tourists’ demand such as cosmetic, snacks and spa.
2) Electronics: impact from the trade war.

 Support for the rest of the month.
1) Likely improved signal for capital movement after weakening in US bond yield. Thus, foreign investors may find less incentive to sell Thai stocks and move capital to US bonds.
2) Global crude price. Price recovery is expected in response to signals from Opec and Non-Opec countries to cut crude production capacity in a December meeting.
3) G20 meeting from November 30 to December 1.  If the US talks to China on a trade agreement in depth, it could boost the sentiment of stock markets across the world, particularly in emerging markets.

Risks to be monitored.
1) Analysts’ cuts in estimates of listed companies’ profit after lower-than-expected 3Q18 earnings results. Estimated market earnings per share is Bt107.9 and Bt117.5 for this year and next, respectively. Market valuation in terms of price to equity may not be attractive.
2) Consistent slowdown in the global manufacturing sector, the lowest in two years as a result of the trade war.
3) Geopolitical risks in Europe due to the problems in drafting Italy’s new budget and the uncertainty of Brexit.
 Research Department, Trinity Securities