THURSDAY, March 28, 2024
nationthailand

SET FACES RISKS OF CUT IN ESTIMATED EARNINGS

SET FACES RISKS OF CUT IN ESTIMATED EARNINGS

In the past two weeks, foreign investors net sold Bt14 billion in Thai stocks, pressuring down the SET Index by 1.57 per cent due mainly to two factors.

First, the MSCI increased its weight in Chinese equities from 5 per cent to 20 per cent on a gradual basis, leading to other Asian stock markets being underweighted. 
The other being the lower-than-expted net earnings of listed companies in the fourth quarter of 2018 at Bt155 billion, compared to the earlier estimate of Bt250 billion.

This week, the SET Index will likely be volatile, moving between 1,620-1,660 points with the major issue being possible cuts in other listed companies’ earnings estimates. 
We also expect the baht to strengthen against the dollar from Bt33 to Bt32. 
Adjustment will likely be made to provision for employee benefits after amendment to the labor law – an expense of about Bt27 billion to Bt28 billion in profit/loss statements, among other changes.
Initially, listed companies'earnings per share ( EPS) has been cut from Bt112.2 to Bt104-Bt106.
 By maintaining the market price to earnings ratio at 16 times, the SET Index is targeted at below 1,700 points, meaning relatively low upside.
Clearer signals from the US-China trade war have been partly priced in. If the negotiations are delayed or end with an unexpected outcome, it could create pressure.
 Meanwhile, domestic politics is not expected to have a major impact on the stock exchange , provided the election schedule for March 24 remains unchanged.
Amid market volatility and limited upside, we prefer high dividend stocks with low Beta. 
Our picks: LH, EASTW, TTW. 
 
Therdsak Thaveeteeratham,|Executive Vice President/Research,|Asia Plus Securities

INDEX PAST POLITICALLY
SENSITIVE PERIOD

Last week was bad for export figures, starting with the US trade deficit rising to US$59.8 million in December and about $620 billion for 2018, a 20.7 per cent decline year on year in China’s exports in February due to trade uncertainty and the New Year |holidays, and a 4.7 per cent drop |year on year in Thailand’s January exports.
The US trade deficit is expected to push President Donald Trump into finalising the trade negotiations with China on March 27.
After last-week’s pressure from ex-divident signs on big caps such as PTT, BCP and BH, the ECB’sut of the estimated euro-one economic growth and dissolution of the Thai Raksa Chart party have led to a positive view on the SET this week. 
In the next period, investors will likely be focusing on political stability after the election and outcome of the US-China trade talks, widely expected to be positive. 
We recommend these groups:

1 Stocks with growth prospects and upside but trading at lower forward price to earnings (PE) than the past averages: SAWAD (Fwd [email protected]), ERW (Fwd [email protected]), GLOBAL (Fwd [email protected]), COM7 (Fwd [email protected]), MEGA (Fwd [email protected]).

2 Stocks with dividend yields higher than 4 per cent: TISCO, HANA, KKP.
Retail plays in the provinces:BJC, GLOBAL, ROBINS, SCCC. 

Passakorn Linmaneechote,|Deputy Managing Director/Research, Kasikorn Securities 
 

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