Range-bound, follow US GDP
The SET is expected to be range-bound with support between 1440-1445, which is expected to be able to stand after a steady decline to where it is technically oversold. However, the lack of a new catalyst limits resistances to between 1460-1470. Key issues to follow is 3Q24 US GDP.
Today’s highlights
- US Consumer Confidence Index by the Conference Board rose to 108.7 in October, highest since January, while Job Openings and Labor Turnover Survey (JOLTS) in September fell to 7.4mn positions, below market expectations.
- The US has implemented restrictions on American companies investing in Chinese technology, including semiconductors, quantum processors, and AI, to prevent capital and knowledge transfer that could aid Chinese technological development.
- Reuters reports China is considering adding 10tn yuan in debt over the next few years to revive the economy, with an initial 6tn yuan package expected to be announced after the Chinese parliament meeting to support local governments.
- The Minister of Finance, after discussion with the BoT Governor, says that maintaining the 1-3% inflation target framework is acceptable but measures to support 2% inflation are needed. Economic stimulus measures will be proposed to the Prime Minister on October 31, aiming to support 2.7-2.8% GDP growth.
- Equinix, a major US data center company, announced a plan to invest US$500mn in Thailand over 10 years. The BoI has approved a first pf phase investment promotion of Bt7.18bn, with operations expected to begin in 2027.
- The Minister of Tourism reports foreign tourist arrivals last week increased 1.6%WoW, mostly long-haul arrivals, the fifth week of growth, bringing year-to-date tourist arrivals to 28,378,473, up 29%YoY
- The situation in the Middle East shows signs of easing, causing oil prices to fall for second day following news of Netanyahu's meeting with ministers, military leaders, and intelligence officials to seek resolution to the Lebanon conflict
Strategy today
In the short term the SET is expected to move sideways up, driven by 3Q24 earnings of US and Thai companies, expected to show growth, plus hopes for additional stimulus from China. However, the SET has limited upside with resistance of 1500 due to the strong US dollar that is pulling funds out of emerging markets, while the market is adjusting to the possibility the central bank may cut interest rate less than expected. In the short term be cautious on stocks that benefit from the lower interest and have already risen to reflect an expected sequential cut in rates (DELTA, GULF, ADVANC and INTUCH) as the market is rebalancing. Our strategy is “selective buy”.
Trading today
Although the SET has pushing momentum, short-term upside is limited as companies begin releasing 3Q24 earnings and as the market waits for a new catalyst. We recommend “Selective Buy” with four main themes:
- Global plays: stocks whose 3Q24 earnings are expected to continue to grow YoY, and 2H24 expected to grow HoH and YoY, with short-term benefit from the weakening of the baht since Oct – KCE, TU, MINT and AOT.
- Earnings plays: stocks with strong fundamentals and strong 3Q24 profit – BEM, BCH, BDMS, AU and TNP. Be cautious on sectors that are likely to come in below expectations – Energy, Petrochemicals and Packaging.
- Stocks with high dividend yield and expected to be targets of the Vayupak and tax-deductible funds with following characteristics: dividend yield of at least 3.5%, high SETESG ratings and high CG and earnings expected to grow - BBL, ADVANC, HMPRO and BCP. Recommend to buy on dip as prices have already moved up.
- For investors who are concerned about tension in the Middle East and want oil stocks to hedge the risk, we recommend an upstream oil stock – PTTEP.
Daily top picks
WHA: The company is one that will benefit the most from the new wave of business expansion, such as data centers. 3Q24 net profit is expected to grow YoY but decline QoQ, while 4Q24 is expected to be the best quarter of the year. 2024 profit is expected to grow 12.7%, and it is expected to continue to grow by 16.2% in 2025, supported by backlog and FDI.
AOT: 4QFY24 core profit is expected at Bt4.0bn, growing 10%YoY (more international passengers) but decline 13%QoQ (lower concession revenue). Profit is expected to continue to grow both YoY and QoQ in 1QFY25, the tourism high season, with upside from China’s Golden Week.
