Sawasdee – November 04 , 2024

Today’s highlights

• TAT plans to launch Phase 2 of the "Northern Travel Half-Half" scheme immediately after Phase 1 winds up, expected to be on Nov 1, the first day of registration. Phase 2 will double the rights to Bt20,000 to encourage more travel, using a budget of Bt8mn.
• The Ministry of Finance has proposed solutions for retail NPLs at commercial banks worth Bt1tn, suggesting 3 years of no interest, extended payment terms and halving the principal amount. The goal is to restructure existing debt to make it payable and enable access to new credit.
• The BOI has approved investment promotion for two major data center projects worth over Bt60bn: a Google subsidiary (Google's 5th data center in Asia, located in Chonburi, planned to open in early 2027) and GDS (located in Chonburi, planned to open in 2026).
• The State Enterprise Policy Office (SEPO) is considering gradually auctioning shares of state enterprises and businesses where the Ministry of Finance holds less than 50% over 4-5 years. Initially, pricing will be set based on market value adjustments.
• Chinese EV sales in the EU declined for the third month, dropping 9.6%YoY in September, impacted by an increase in tariffs on Chinese imports of up to 45%.
• IMF reports ASEAN economies are likely to benefit from increasing geopolitical tensions between China and the US, particularly countries exporting goods subject to tariffs by either China or the US.
• OPEC has agreed to postpone the scheduled increase in oil production in December by one month due to weak demand, especially from China, and increased supply from non-OPEC sources, reducing pressure on oil markets.

Strategy today

In the short term the SET is expected to recover from 1450 on hopes China’s inflation will be lower than expected, leading it to increase stimulus, plus a likely 25 bps cut by the Fed, which will support stock markets and the US election, which will help clear the uncertainty about the US economy. There may be high fluctuation if Trump wins the election. Domestically, 3Q24 earnings announcements are expected to drive the market. However, FX volatility and funds flowing out of Asia’s markets will pressure the SET’s upside at 1500. Our strategy is “selective buy”.

Trading today

In the short term the SET is expected to recover from 1450 but is still pressured at 1500 due to FX fluctuations and fund outflow from Asia. We recommend “Selective Buy” with four main themes:

• Earnings plays: stocks with strong fundamentals and 3Q24 profit – CPAXT, TU, BCH, MTC, CBG, WHA, BDMS, CPALL, TIDLOR, BEM and AOT. Be cautious on sectors whose 3Q24 may miss expectations – Energy and Petrochemical due to falling oil price.
• Global plays: stocks which benefit from a weakening baht in the short term, and with YoY 3Q24 earnings growth, and growth both HoH and YoY in 2H24 – TU, AOT.
• Stocks with high dividend yield and expected to be targets of the Vayupak and tax-deductible funds (SSF, RMF and ThaiESG) 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
AOT: 4QFY24 core profit is expected at Bt4.1bn, up 14%YoY (more international passengers) but down 10%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.

WHA: The company is one that will benefit the most from a new wave of business expansion into data centers and others. 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%, followed by 16.2% growth in 2025, supported by backlog and FDI.