Sawasdee – October 02 , 2024

Today’s highlights

• Iran launched dozens of missiles at Israel in retaliation to the assassination of a Hezbollah leader. The US President ordered military assistance to Israel, concerned about the potential for wider conflict in the Middle East.
• US job openings in August increased to 8.04mn, higher than expected. The September manufacturing PMI fell to 47.3, the third month of contraction in the manufacturing sector.
• Eurozone inflation in September was 1.8%YoY, lower than expected, due to falling energy prices and stable goods prices. This is the first time inflation has been below the 2% target in 3 years, increasing the likelihood of an ECB interest rate cut in October.
• Chinese and US commerce ministers plan to hold a phone conference on trade relations, continuing from the meeting in Beijing last month. Key topics include EV and investment restrictions, Russia sanctions, and trade tariff concerns.
• Thailand international trade data for August 2024 shows exports valued at Bt939.52bn, +13.0%YoY, and imports at Bt941.02bn, +15.0%YoY, resulting in a trade deficit of Bt1.5bn.
• The Ministry of Finance will hold its first meeting to draft a bill on comprehensive entertainment business operations, with plans to establish a committee to propose the draft law to the cabinet.
• The Bangkok governor announced plans to pay the first instalment of Bt11.76bn to BTS within 180 days, as per the Supreme Administrative Court's ruling. Two more instalments totalling Bt25.32bn remain, plus future debt of Bt800mn/month.

Strategy today

In the short term the SET is expected to move sideways up but may face profit-taking after sharp rises in stock prices as well as external factors. The market will be boosted by the start of the cyclic downward in interest rate (Finance and BoT will discuss this week), government stimulus and baht appreciation that is expected to continue aiding fund inflow. The SET is expected to surge if funds flow into banks, Property, Electronics and tourism-related stocks; stocks offering good returns are expected to continue to perform well. However, US and China PMIs are expected to slow down. Our strategy is “selective buy”.

Trading today

The SET is expected to move sideways up but may face profit-taking in stocks that have moved up sharply as well as on external factors. We recommend “Selective Buy” with four main themes:

• Stocks expected to benefit from the Vayupak Fund. We highlight stocks in SET100 that have: 1) good dividend yield of at least 3.5%, 2) SET ESG Ratings between A and AAA and 5-star CG and 3) a strong financial position, with profit expected to grow in 2025 – KTB, BBL, BCP, ADVANC and HMPRO.
• Desire to speculate in stocks poised to benefit when the interest rate cycle starts down - Leasing (MTC TIDLOR), Property Development (AP SIRI), Commerce (CPALL), Utilities (GULF) and REITs (LHHOTEL and DIF).
• Desire to speculate in stocks benefiting from flood repairs – HMPRO, GLOBAL, CPALL, BJC, DCC and TASCO, with data showing an average return of 5% for those speculating from mid-Sep to early Nov in years with La Nina.

The baht appreciation in 3Q24 will hurt companies that are primarily exporters, and we suggest avoiding these stocks in the near term: TU, GFPT CBG and KCE. Those who want to speculate on companies that benefit from baht appreciation may choose AAV, GULF, GPSC and BCP.

Daily top picks

PTTEP: The high oil price is a S-T catalyst for stock price, but it has underperformed oil price so far, yet it is a way to hedge against tension in the Middle East. Profit and balance sheet are still strong. 2024 core profit is expected to be Bt82.7bn, growing 5%. We recommend buy for trading at not higher than Bt132.50/share.

GULF: 2H24 core profit is expected to grow strongly from new capacity, a new IPP, GDP 4 (662.5MW), and many solar projects that are being developed. The merger between GULF and INTUCH is positive as it will benefit from the cyclic downtrend in interest rate. Valuation is also attractive, trading at 2024F PER of 33x (-1SD).