FRIDAY, March 29, 2024
nationthailand

Asia on the track of recovery but volatility remains high

Asia on the track of recovery but volatility remains high

Global economic growth is gathering pace. The most encouraging signs are emanating from the United States, so we believe US economic growth will accelerate. 


During the past year, employers in that country recruited a net total of 2.7 million new workers, but the number of job vacancies still grew by 300,000, according to DBS Economic Research. The demand for labour is growing faster than supply. As a result, wage growth is heading north, and this will provide a big boost for US domestic consumption. 
DBS economists expect US gross domestic product for the fourth quarter of 2016 to be revised up to 2 per cent (quarter-on-quarter seasonally adjusted annual rate) from its advance estimate of 1.9 per cent. In contrast, the euro zone’s 4Q16 GDP growth was revised down to 1.7 per cent year on year from 1.8 per cent previously. However, the pick-up in global trade could support the euro zone’s economic growth this year. 
Furthermore, Thailand’s exports are seeing a turnaround and its export growth should gather pace this year.
We advise investors to diversify their portfolio given the expected high market volatility this year. 
For the Thai market, our fundamental picks are AOT (Airports of Thailand), BANPU, HANA (Hana Microelectronics) and TISCO (Tisco Financial Group). 

RESEARCH DEPARTMENT
TRINITY SECURITIES

We started to see the US stock markets outperforming again after President Donald Trump gave an interview involving his tax-cut plan late last week. The planned tax cuts may be announced in the next weeks. 
The US Federal Reserve may announce details for reductions in its balance sheet this year, which heightens the probability of US interest-rate rises in the short term (probability of a March rate increase in 44 per cent). 
Given the SET Index’ limited upside, focus investment in stocks with specific support themes. This month, focus on dividend stocks – AP, TISCO (Tisco Financial Group), AMATA, HANA (Hana Microelectronics), KTB (Krung Thai Bank), QH (Quality Houses), SC (SC Asset), SCC (Siam Cement), SIRI (Sansiri), TCAP (Thanachart Capital) – and stocks with cheap valuations. Based on a recent survey, only commercial banks have been traded at lower forward PE (price-to-earnings) and forward PBV (price-to-book values) than their long-term averages: KKP (Kiatnakin Bank), KTB, TCAP, TISCO, SCB (Siam Commercial Bank).

TISCO SECURITIES

Uncertainty over the Treasury Department’s plan to raise land-rental fees from AOT (Airports of Thailand) as well as charging retroactively for past payments (an issue that has implications for other listed companies) may weigh on market sentiment in the near term. The plan could have a significant negative impact on other firms given that there are 160,000 land-rental contracts under the Treasury Department, according to Thai PBS News. 
As the affected state enterprises and companies account for nearly 14 per cent of the Stock Exchange of Thailand’s total market cap, the new measures are likely to create a short-term overhang.
Meanwhile we have removed ADVANC (Advanced Info Service) and INTUCH (Intouch Holdings) from our top picks after the former’s announcement of a new dividend policy that lowers the minimum dividend pay-out in 2017 from 100 per cent of earnings to 70 per cent. They have been replaced by KTB (Krungthai Bank) after the recent upgrade by our bank analyst. 
Despite the Treasury Dept’s planned rental increase, we still like AOT (more attractive to retail investors after recent par split) and PTT (benefiting from rising prices of crude oil and coal). 
Our other top picks include SCC (Siam Cement), CPALL and contractors such as STEC (Sino-Thai Engineering and Construction) and UNIQ (Unique Engineering and Construction).
 

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