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Moving in a range, waiting for cabinet formation
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| Market today |
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The SET is expected to move within 1280-1320. The rise in the index reflects the rapid selection of a new Prime Minister and the market is now waiting for the formation of the cabinet. 1290 is a key support level if it starts to turn down, with the next support at 1280 points. Watch for release of Thailand's 2Q24 GDP this morning.
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| Today’s highlights |
• Yesterday, Ms. Paetongtarn Shinawatra received a royal command appointing her as the 31st Prime Minister. She is preparing to announce policies in September, focusing on four main areas: major economic stimulus, soft power, drug suppression and country-wide Bt30 healthcare availability.
• The Finance Ministry is preparing short-term stimulus measures. The PM cautious on the legalities of the digital wallet.
• The FTI reported the industrial confidence index in July increased for the first time in four months, tagging domestic consumption. The acceleration of budget disbursement has put more money into the system, benefiting industrial goods and construction materials.
• TDRI expects the Thai economy to continue growing for the rest of this year despite the change in Prime Minister, projecting annual growth of 2.3-2.6%. It also suggested reviewing the digital wallet policy.
• Kamala Harris said that her economic proposals aim to reduce expenses for the middle-class and low-income families to attract key voter groups, viewing this as crucial for winning the U.S. presidential election on November 5.
• The PBOC said it will continue to support domestic economic recovery but will not use excessive stimulus measures.
• Mastercard announced a 3% reduction in its global workforce as part of a restructuring to focus on core business, expected to affect about 1,000 employees in Q3 2024.
• The strike at BHP's Escondida copper mine in Chile has caused global copper prices to surge as the market becomes concerned about copper supply.
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| Strategy today |
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In the short term, the SET will be volatile pending the formation of the new government and announcement of its policies. We see Buy support at around 1,280 points. Weak EU/US PMIs are expected, hinting at potential Fed rate cuts. The Thai MPC is likely to hold rate at 2.5%. 2Q24 Thai GDP growth is forecast at 2.4% YoY (market) or 2.1% (our estimate), up from 1Q24's 1.5%. Our strategy is "selective buy".
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| Trading today |
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While the SET is expected to fluctuate while waiting for the formation of the new government to learn about their economic policies, there are still hopes the Thai stock market will be aided in its recovery by increased fund flows into emerging markets and greater political clarity. We recommend "Selective Buy" with four main themes:
1) Earnings plays: strong profit momentum, with 3Q24 profit expected to grow YoY and QoQ and expected to grow YoY and HoH in 2H24, while valuations are attractive - DELTA, GULF, TU, BTG, BDMS, TRUE and BEM.
2) For risk-averse investors who want to generate cash flow from their portfolio, we suggest dividend stocks for a short-term investment - BCP and TU.
3) Stocks expected to benefit from the adjustment of ThaiESG conditions that will raise the maximum tax reduction to Bt300,000 and reduce the holding period to 5 years - ADVANC, AOT, CPALL, BDMS, BBL, KTB and GULF.
4) Brent price has recovered as there continues to be attacks on cargo ships in the Red Sea and on energy infrastructure in Russia, although the Middle East conflicts remain fairly contained. We expect the price to be at US$80-90/bbl. Oil stocks are good as a hedge against risk. For high-risk takers, we recommend an upstream oil stock - PTTEP.
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Daily top picks
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MINT: Stock price is down 16% YTD due to concerns of a global economic slowdown, making valuation cheap. Negative issues are already reflected in the stock price, limiting downside. Strong profit momentum expected.
KTB: 3Q24 profit is expected to be stable YoY, followed by YoY growth in 4Q24 profit. 2024 profit is projected to increase 11% due to lower credit cost, higher loan growth, improved NIM and fee income growth. It has lower asset quality risk compared to other banks and valuation is cheap, trading at 2024 PER of 6.0x (-2SD).
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Today’s reports
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Tourism (Hotel) - Prefer AWC and MINT. Growth to continue and valuations are stretched to the downside.
BEM - 2Q24: In line; momentum stronger in 2H24
BTG - Acquires Singapore's #1 egg operator
SAWAD - Slower growth and several risks
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