Sawasdee – November 18, 2024

Limited downside, expected to recover

Today’s highlights

• The Deputy Finance Minister will propose economic stimulus measures at the economic stimulus board meeting on Nov 19, including a Bt10,000 handout to the elderly, only those not covered in the first phase, public debt solution and New Year's gifts by the end of this year.
• China reports oil refinery crude processing fell 4.6%YoY in October due to plant closures and reduced operating rates at small independent refineries. Factory output growth slowed, and real estate demand shows no signs of improvement.
• President-elect has nominated Robert F. Kennedy Jr. as Secretary of Health and Human Services. He is known as an anti-vaccine campaigner, causing vaccine manufacturers and packaged food stocks to decline.
• The Thai National Shippers Council (TNSC) says the rapid baht depreciation benefits exports and recommends foreign exchange risk hedging due to volatility. It assesses the appropriate baht value at Bt34-35/US dollar.
• Government House sources say that the tripartite board list has been finalized and is pending cabinet approval. Meetings are expected to begin in early December to consider the nationwide Bt400/day minimum wage increase.
• Berkshire Hathaway reports in 3Q24 that it invested in Domino's Pizza and Pool Corp while divesting from Apple and Bank of America. The company holds approximately US$325bn in cash and has suspended its share buyback program that began in 2018.
• Russia has halted gas supplies to Europe through Austria of about 17 million cubic meters per day, or 5% of total European imports, since last Saturday due to payment disputes.

Strategy today

In the short term the SET will move sideways as external factors are limited after the market has accepted that Trump will be the next US president, as seen in funds flowing to US financial and small cap stocks, while still flowing out from EM and China markets due to concerns about US tariff policy. Domestically, the market will be adjusting earnings forecasts after 3Q24 overall earnings weakened YoY and QoQ. There are also key issues to follow: the economic stimulus board meeting on Nov 19 and the constitutional court deciding whether to accept Phue Thai party dissolution on Nov 22. Our strategy is “selective buy”.

Trading today

In the short term the SET is expected to move sideways on few external factors and standing by for Trump’s tariff policies; at home, the market is waiting for additional economic stimulus. We recommend “Selective Buy” with four main themes:

• Event plays: stocks expected to benefit from additional stimulus: Bt10,000 handout phase 2, Easy e-Receipt, etc. Recommend Commerce – CPALL, CPAXT, CRC, HMPRO and TNP.
• Stocks benefiting from a strong dollar and weak baht. Recommend those with revenue from exports – CPF and DELTA - and involved in tourism – AWC, AOT, MINT
• Earnings plays: stocks whose 4Q24 profit is expected to grow YoY and QoQ, and on which we recommend outperform – GULF, OSP, CBG, AMATA, AU and TIDLOR.
• 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 and HMPRO.

Daily top picks

BBL: Our only top pick in the Bank sector, on which we recommend Outperform. There are catalysts to stock price: 1) valuation is the most attractive; 2) credit cost is likely to fall with upside from loans to THAI; 3) loan growth is expected to outperform the sector; 4) upside to NIM and; 5) high possibility dividend will be raised, giving further upside.

CPAXT: A player in the Commerce sector that will benefit strongly from additional stimuli. 4Q24 profit is expected to be this year’s peak, growing QoQ on seasonality and YoY from higher sales and margin. After the M&A, synergy will start to take place in 4Q24 and will be clearer by the middle of 2025.