Strengthening dollar could put pressure on bourses
There are a number of risks currently hanging over global markets. Fears of a potential trade war still lingers, as the US has turned tougher on China after a few days of friendly exchanges.
Geopolitical tensions have risen in the wake of the US calling off a historic meeting with the North Korean leader next month in Singapore. The US withdrawal from the Iran nuclear deal and the imposition of new sanctions on Iran have provided fuel for global oil markets to head north.
As investors turn their attention to rising interest rates, the sentiment on emerging markets has turned sour, especially for developing economies that are laden with debt and are thus highly exposed to rising global interest rates. Among Asean countries, the Philippines and Indonesia have raised their benchmark rates to slow down money outflows and support their weakening currencies. Nonetheless, such actions are still not enough to stem the ongoing outflows.
DBS Group Research expects Asian equities to continue to flounder if the US dollar keeps strengthening. Global investors seem to be derisking their portfolio currently. The factors to keep an eye on include: the US Federal Open Market Committee meeting on June 1213; trade tensions, as the US might raise its tariffs on automobile imports; and the potential for the new Italian government to pursue populist polices such as tax cuts and fiscal spending, which are against the EU fiscal framework. We believe investors could gradually accumulate key stocks/real estate investment trusts on any price weakness.
Tisco Securities
Global macro uncertainties arecontinuing to put downward pressure on the SET, sending the index to itslowest level since early April. In particular President Trump is roiling global markets by his administration’s threat to impose tariffs of up to 25 per cent on vehicles imported to the US. This comes on top of renewed USChina trade war concerns and Trump unexpectedlycancelling the USNorth Korea summit scheduled for next month.
The downturn in global marketsentiment has more than offset posiฌtive domestic economic and political news including the announcement that Thailand’s GDP in the first quarter of 2018 grew 4.8 per cent year on year (YoY), easily beating our forecast and consensus’s estimate of 4 per cent.
First-quarter earnings were sluggish as we anticipated, although there were a few positive surprises (vs consensus). We expect earnings to pick up momentum in the second and third quarters, with telecom, energy and commerce leading the charge. The SET reported first-quarter earnings per share (EPS) of Bt28.3, 15 per cent above the initialconsensus estimate (according to Bloomberg) as of end-March, and 3 per cent below our forecast of Bt29.2. For stocks under our coverage, aggregate EPS beat consensus by 8.1 per cent. The biggest positive surprises for stocks under our coverage occurred mostly in the energy/petrochem sectors (PTTEP, TOP, BGRIM, GULF and IVL), telcos (TRUE and DTAC) and a few othersectors (BLA, LH, BDMS, AMATA). The performances of banks and hotels were mixed. The most significant negative surprise vs consensus was KTB followed by MINT for stocks under our coverage.
Our top picks (heavy concentration in energy/petchem and select big caps with catalysts) appear to be working, and recent events have not changed our view. We continue to expect our model portfolio (TRUE, PTTEP, IVL, PTTGC, BDMS, CPF, CPALL, LH, QH, PSH, SCC and BBL) to continue moving higher over the next few months.
Research Department
Trinity Securities
Foreign investors’ sales of Thai stocks have come partly from movement into the bond market, which has led to the baht being steady.
We have to keep a watch on local institutional investors with weakening net purchase after the SET Index fell below their cost at 1,7501,760 points amid regulatory risk for the energysector. We see no impacts on PTT’s operating results this year.We expect the LPG fund to maintain the LPG price for two months from now. If PTT subsidises this part, its EPS and stock price will be affected by only Bt0.06 and Bt0.70, respectively.
PTT has limited downside risks and we recommend “Buy” at the target price of Bt64.30.
Investment strategy: “Hold” for investors who accumulated stocks when the SET Index made corrections earlier. Find bottom fishing on blue chips (SET50) with sound fundamentals and price corrections in the past three days: PTT, MINT, PTTEP, BANPU.
