Opportunity for Asian bargain-hunt
THERE ARE still a few overhanging issues that could keep global market volatility at elevated levels.
In the DBS Asian Equity Strategy for the fourth quarter, the key issues include high market valuations, the US presidential election, weak earnings outlook, banking concerns in Germany, and the possibility of fund-flow reversals.
There have been massive fund flows into Asia, with year-to-day inflows (excluding Singapore and Hong Kong) reaching US$36.7 billion – with $21 billion in July and August alone.
For the Thai market, the cumulative inflows stand at a hefty $3.9 billion to date. Any reversal could be quick and lead to a sharp drop in the equity market. The same goes for Asian currencies. These are the key risks that are playing out in our minds.
However, it appears that Asian markets are mostly bottoming out, with an improvement in earnings expected next year. The market’s correction should be viewed as an opportunity to bargain-hunt.
DBS’s top-pick markets are Indonesia, China (H-shares and MSCI China) and Hong Kong (Hang Seng, MSCI Hong Kong).
The demand for holding renminbi (yuan) assets is on the rise given the renminbi’s inclusion in the International Monetary Fund’s currency basket since October 1.
We have neutral weightings on Singapore, Thailand and India, while being underweight on the Philippines. Thai equity market conditions remain favourable, perhaps better than some of its Asean peers, but still not that outstanding. Fundamentally, the Thai market offers high yields with solid earnings growth.
Its valuation is not the most expensive among Asean peers. Hence if the growth momentum continues as anticipated and the market headwinds ease, it is likely that an upgrade of the Thai market by most equity research houses will follow.
Tisco Securities
The Stock Exchange of Thailand has flexed its resiliency over the past couple of weeks, bouncing back from its low of 1,411 to hover around the 1,500 level.
Foreign investors continue to be buyers of Thai stocks, with September to date showing a Bt19-billion net foreign buy, versus local institutions’ Bt16.97 billion net sell for the same period.
The US Federal Reserve’s decision to hold off on an interest-rate rise (December now seen as likely) and encouraging domestic economic data continue to put wind in the SET’s sails.
On the equity front, we have removed TOP (Thai Oil) and PTTEP (PTT Exploration and Production) from our least-preferred stocks list in light of the recent production freeze announced by the Organisation of the Petroleum Exporting Countries.
We maintain our high-yield top picks ADVANC (Advanced Info Service), INTUCH (Intouch Holdings), and BH (Bumrungrad Hospital) with expectation of a SET rally ahead of the election in the final quarter of 2017. After downgrading TCAP (Thanachart Capital) to “hold”, we no longer have any “buy” recommendation under our bank coverage. Meanwhile we have initiated coverage of solar-farm player BCPG with a “buy”, forecasting strong capacity growth from farms in Japan.
