Sawasdee – November 01, 2024

Today’s highlights

• The BoT says the economy continues to recover in 4Q24, supported by tourism and gradual export recovery. 3Q24 economic growth was in line with expectations at ~3%. It will monitor export recovery, the manufacturing sector and geopolitical issues following the US presidential election.
• Three real estate associations are asking the BoT to relax the LTV rule and make loans more accessible. They warn the impact will be severe within 6 months, rippling out to hurt the construction material supply chain and contractors nationwide if no solution is found.
• The Minister of Finance said next week the cabinet will look at low-interest home loan measures worth Bt55bn to buy, decorate, repair and build houses and condos. This is aimed at supporting real estate sector growth and help low-income earners access housing loans.
• Israeli intelligence believes Iran is preparing to attack Israel from Iraqi territory soon, possibly before the US presidential election on November 5.
• Microsoft shares fell 6% and Meta lost 4.1% yesterday despite both reporting better-than-expected earnings and revenue. They warn that rising AI technology costs could impact their profitability.
• The BoJ kept its policy rate at 0.25% as expected. The BoJ governor signaled future rate hikes but gave no specific timeline, saying it will first assess economic trends and inflation.
• The Oil Fund continues to maintain diesel price at Bt33/liter after the price freeze ended on October 31. The fund's deficit does not exceed Bt100bn, with improved liquidity of Bt7-9bn monthly income. Loan repayment is expected to be complete by September 2028.

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. 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 and 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

PTTEP: High oil price in the short term is expected to be a catalyst for stock price, while the stock is also a hedging asset to risk in the Middle East conflict. Profit and balance sheet are strong. 2024 core profit is expected to be Bt80bn, growing 2%. Recommend to buy for trading at not higher than Bt126.50/share.

GULF: 3Q24 profit is expected to make a new high of Bt5.7bn, up 20%QoQ and 70%YoY on substantial FX gain; core profit is expected to be Bt4.5bn, down 10%QoQ on seasonality but up 6%YoY from new installed capacity. Positives include the M&A deal between GULF and INTUCH and the start of the interest rate downcycle.