Sawasdee – September 6, 2024

Market today

The SET shot back up to above 1400. Although there may be a slowdown to reduce heat, signs overall are positive, supported by domestic factors: economic stimulus, fund injection from the Vayuphak fund and fund inflows. Supports are at 1380-1390, while resistances are at 1415 and 1425.

Today’s highlights

• The Ministry of Finance is preparing to sell Vayupak 1 units to general investors on Sep 16-20, and to institutional investors on Sep 18-20. Investment in the stock market is expected to begin on Oct 1, with an estimated Bt150bn entering the market.
• The Ministry of Commerce reports August 2024 inflation increased by 0.35%, rising more slowing but still the fifth month of a rise. This is due to higher prices for fresh vegetables and fruits because of widespread rains and flooding. Inflation for 8M24 is up 0.15%.
• ASEAN countries are announcing plans to attract semiconductor investments. Malaysia is leading with a strategy to become a global chip production center. Vietnam is preparing to offer tax incentives for up to 150 years and 10 years of free land leases.
• The Ministry of Finance is confident the economy will grow higher than the expected 2.7-3.0% this year. 4Q24 will see support from the Vayupak Fund, the digital wallet and spending of the FY2025 budget from October.
• Nielsen reports advertising spending for high-end products in Thailand increased by 214% in 1H24, the highest growth in Asia. About 82% of the advertising budget was spent on out-of-home media, viewed as the most credible advertising channel.
• The EIA reports US crude oil inventory decreased by 6.8mn bbl last week, more than market expectations. Reuters reports OPEC+ may consider postponing production increases by another 2 months amid various pressures on the oil market.
• ADP reports US private sector employment in August increased by only 99,000 positions, the least since January 2021 and below market expectations. US services sector index for August, compiled by ISM, rose to 51.5, higher than market expectations.

Strategy today

In the short term, the SET is expected to move sideways up, driven by recovering consumer confidence as the political dust settles and on hopes of rapid stimulus in 3Q-4Q24. The BoT seems more open to an interest rate cut and funds are flowing into EMs, resulting in appreciation of the baht and other Asian currencies. Funds are expected to move out of Energy, Petrochemical and ICT and flow into Bank, Commerce, Construction Services and Healthcare, which will reduce the impact from externals, i.e. slowing US and China manufacturing and services PMIs. Our strategy is "selective buy".

Trading today

In the short term the SET is expected to move sideways up on clearer political skies and acceleration of economic stimulus in 3Q-4Q24. We recommend "Selective Buy" with four main themes:
1) Stocks expected to benefit from more rapid short-term stimulus by the new government in September that will benefit consumer staples players - CPALL, CPAXT, TNP and CBG.
2) For investors who want to generate short-term cash, we recommend high quality dividend stocks that are paying a 1H24 interim dividend with yield of more than 1.5% - HTC, BCP and BBL.
3) Investors who want to speculate in stocks that benefit from a downward interest rate cycle - leasing (MTC), property development (AP), commerce (CPALL and CPAXT), and utilities (GULF).
4) Earnings plays on stocks with strong profit momentum, with 3Q24 profit expected to grow YoY and QoQ, 2H24 expected to grow HoH and YoY and inexpensive valuations - DELTA, GULF, BDMS and BEM.

Daily top picks

BBL: This is a top pick in the banking sector with several price catalysts: 1) lower provisions (credit cost) for the rest of this year, 2) outstanding loan growth, 3) strong NIM and 4) lower cost to income ratio, while valuation is attractive, trading at 2024F PER of 6x (-2SD); it also has low asset quality risk.
CKP: In the short term it will benefit from declining bond yield. 3Q24 profit is expected to continue to improve due to rainy season that will raise water volume for electricity generation to this year's high. Electricity generation and water inflow in July rose YoY at both XPCL and NN2 dams.

Today’s reports

TQM - Gradual recovery with new acquisitions