Sawasdee – November 6, 2024

The SET has a limited upper bound with resistance at 1490-1500, with no new catalyst, while investors keep an eye on the US election results, which may lead to greater fluctuation and lead to risk-averse selling after an earlier rise driven by only few stocks. The lower bound is support of 1473. A fall below this would be negative, with next support at 1460.

Limited upper bound, be cautious of fluctuation

Today’s highlights

Thai Bankers' Association is looking at additional financial relief measures for retail debtors by offering suspension of payment of interest while maintaining payment on principal. If payments are made in line with the rules, all overdue interest will be waived. It emphasizes that eligible borrowers must have taken loans before January 1, 2024, and have started to miss payments.
TNSC indicates that regardless of whether Trump or Harris wins, Thailand must adapt to trade wars. In the 7 years of the current trade war, Thailand benefited from production base relocations and exports to the US. It is confident exports will grow over 2% this year, exceeding Bt10tn, the highest in 30 years.
The Deputy Minister of Finance is considering two new taxes: a tax on salt and another on fats to reduce unhealthy consumption and has asked the Excise Department to study which products should be initially subject to the salt tax. For the tax on fat, it is currently studying approaches to taxes on good fats vs bad fats.
Several energy companies in the Gulf of Mexico have begun evacuating workers ahead of tropical storm Rafael, which is expected to strengthen into a hurricane this week. This may reduce oil production in the area by ~4mn bbl.
ISM reports October Services Index rose to 56.0, the highest since August 2022 and above market expectations, indicating continued economic strength.
The PM met the GDS Holdings CEO to discuss GDSI's investment plans, including construction of hyperscale data centers. The first project has received BoI approval, and it is confident Thailand can become one of the region's data center hubs.
Keep an eye on US election results and exit polls after ballot boxes in the east closed at 6:00 am (Thai time); they close three hours later in the west. Unofficial results are expected tonight at 8:00 pm.

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. The market is likely to be highly volatile 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 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

HMPRO: 4Q24 profit is expected to grow YoY and QoQ after signs of improving SSS as demand comes back after the floods plus additional purchasing power after Bt10,000 cash was distributed to 14.2mn people. The company continues to add branches and improve margin. It is a proxy of the Commerce sector, which is positioned to benefit from any new stimulus.

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.