SET has yet to bottom out, analysts say
Foreign selling could continue but lessen. From its high at 1,649.77 points on May 21 (intra-day) to June 6, the SET Index slumped nearly 160 points due mainly to foreign selling. During that period, net sales amounted to Bt32 billion.
From now on, it is believed overseas investors’ net sales could be seen consistently as foreign shareholding remains unusually high. The latest purchase from November 29, 2011, accumulative purchase saw its record high at about Bt106 billion in early February this year. Based on statistical data, selling spree usually incurs no less than 40 per cent of accumulative buy. Thus, there remains selling opportunity but sales could be less than those in the past two weeks. It is likely that selling could pressure the SET Index for a while.
Based on fundamentals, the SET Index’s recent drops pushed the current PER down to slightly below 16 times from over 17 times. On an assumption of the 2013 Market EPS Growth at 23 per cent and the current PER, the market PER at the end of 2013 declines to 14.3 times, which would bec attractive for investors to seek stocks with sound fundamentals for long-term investment. If the SET Index could stay at PER of 15 to 16 times by the end of 2013, its return could range from 5 to 12 per cent for a period of slightly more than six months. Based on such expected returns, it is possible to see accumulative buy of medium-to long-term investors, and that could limit downside risk for the Thai stock market.
We suggest investors find stocks with strong fundamentals and declines in prices that give upside for investment. First target is to raise equity holding from 30 per cent of portfolio to 40 per cent. Stock picks: BECL (fair value at Bt52). It has many positive factors like toll raise, listing of its subsidiary CK Power and a study of Infrastructure Fund in late 2013. SVI (fair value at Bt5.2). Its 1Q13 earnings performance is expected to hit bottom and it could improve in 2Q13 and hit a high in 2H13 as buying orders from five new customers will generate significant income.
BBL (fair value at Bt280). It’s a banking stock with much lower valuation than the average and likely earnings improvement.
To worries of expected downgrade of Thailand’s credit rating by Moody’s Investor Service, there is less chance for such move, based on the country’s GDP growth, foreign reserves and fiscal stance. However, if it happens, the ASP Research, based on historical data, finds that a downgrade on the country’s credit rating drove the SET Index down 3-4 per cent in the first and second week. With an 83 per cent probability, investors should not weigh on this issue too much.
Chaiyaporn Nompitakcharoen
Head of Tactical Research
Bualuang Securities
The SET lost 3.51 per cent WoW as foreign have reduced investment exposure in Thai stock market. Since mid of March this year, foreign have sold Thai stock with total amount of Bt50bn as economic data and earnings were below expectation. Not only Thai stock market, other ASEAN markets also were sold. It appeared that investors started adjusting portfolios in anticipation of the US Federal Reserve reducing its bond purchases later this year. Net outflows from Emerging market including Asia, Latin, and Eastern Europe remain high with total amount of US$2.5-3bn per week, a bit high relative to normal data. At current level, the SET is traded at forward PER of 13.6x relative to earnings growth of 20 per cent and 15 per cent in 2013 and 2014 respectively. Our risk indicator suggests the Thai stock market’s volatility will remain high, implying the exchange has yet to find bottom out yet. So, we suggest investors should stay aside market for a while.
Kitpon Pripisankit
Strategist
Kasikorn Securities
The SET Index slumped in the first week of June on concerns that the US Fed would scale back its bond purchase under QE. That drove foreign investors to adopt asset reallocation and take profits on stocks in Asia-Pacific, particularly TIP (Thailand, Indonesia, Philippines). TIP stock markets previously jumped. Foreign investors sold Thai stocks worth over Bt35 billion for 10 consecutive trading days, dragging the SET Index down below 1,550 points to test 1,480 points in late of last week. That was 4.8 per cent WoW.
We expect concern over US QE scaling back and the yen appreciation to exceed 97 per US dollar with next week’s likely more appreciation to pressure the SET Index to move sideways. Such concern could prompt the market de-rating. We forecast the downside risk of 1,450-1,430 points (PER of 12 times, below the long-term average at 13 times). We suggest investors to gradually have accumulative buy of stocks. We increase our weight of Thai stock investment to 100 per cent if the SET Index declines to such level.
Next week, we suggest investors to pick stocks that are expected to outperform the markets. They include big commercial banks, energy firms and ICT companies. Stock picks: SCB, BBL, KTB, TOP, PTT, PTTEP, ADVANC, DTAC, TRUE and SAMART. Accumulative buy could be for medium-sized stocks with sound fundamentals like TTA, MALEE, SPCG, TK, PM, KCE and NMG.
