Be cautious, although the Fed is relaxing
The Fed cut interest rate by 25bps as expected. Although the positive will relax the market as the US dollar strengthens and US bond yield declines, be cautious as the market continues to worry over Trump’s trade policies. Upper bound is limited at resistance between 1478-1487, and there is downside to support of 1450-1460. Key to follow is China’s NPC meeting today.
Today’s highlights
- The SET recommends investors consider information carefully before trading in DELTA shares in view of the steady rise in price, with P/E ratio at 91.11x and P/B ratio at 25.36x.
- EGAT says it is conducting studies for three pumped-storage hydropower plant projects under Thailand's PDP2024 with total capacity of 2,472MW, and electricity production cost of Bt2, reducing carbon emissions to support Thailand's Net Zero target.
- The Minister of Commerce is confident Thailand will benefit from Trump's presidency, expecting exports to the US to increase as they replace goods from China. He hopes for 5% export growth and more foreign investment relocations to Thailand.
- The BoE voted 8-1 to cut policy rate by 25bps to 4.75% as expected, following a continued inflation slowdown, despite raising next year's inflation forecast to 2.75% before falling within the 2% target in 2026.
- The Fed cut interest rate another 25bps to 4.50-4.75% as expected, the second rate cut this year, hoping to stimulate the economy and oil demand.
- US Bureau of Safety and Environmental Enforcement (BSEE) says over 22% of Gulf Coast oil production, approximately 391,214 barrels/day, has been suspended to deal with Hurricane Rafael
- China Customs reports October exports grew 12.7%, significantly exceeding market expectations, driven by strong foreign demand, but imports contracted 2.3%, more than expected due to weak domestic demand.
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. Since Trump won the election, the market is likely to be highly volatile. 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 move up 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 on which we rate Outperform with strong fundamentals and 3Q24 profit – CPAXT, TU, BCH, MTC, CBG, WHA, BDMS, CPALL, TIDLOR, BEM and AOT.
- Global plays: stocks which benefit from a weakening baht in the short term, 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
CPALL: 3Q24 core profit is expected to grow 39%YoY, outperforming the Commerce sector, supported by higher sales and margin in the CVS business and CPAXT. 4Q24, which is high season, is expected to be the best quarter of the year, with government stimulus and lower interest rate raising upside to our estimate.
GPSC: It has a short-term benefit from falling bond yield. 4Q24 profit is expected to grow QoQ and YoY on expectations of recovery at ADAAVA, full operations at its offshore wind project in Taiwan and fewer stoppages of XPCL hydropower plant. Recommend to buy for trading at not higher than Bt41/share.
