To continue to move down, buffeted by negatives. |
| Market today |
The SET is expected to continue declining on local political uncertainty as well as external pressures, with the strong US employment supporting the Fed to raise interest rate, the appreciation in the US dollar weakening the baht and pulling funds out of the market. The next support is at 1,479. A fall below this is bad news overall, with next support at 1,465. The upper bound is at a resistance of 1,500-1,520. |
| Today’s highlights |
• US ADP nonfarm employment in Jun increased more than expected to the highest since July 2022, while initial jobless claims last week also rose more than expected. US services PMI by ISM in Jun also gained more than expected. • US 2-year government bond yield rose above 5%, reaching a 16-year high, while 10-year rose above 4% amid concerns that the Fed will raise interest rate to 5.25-5.50% at the FOMC meeting on July 25-26. There is only a 3.9% probability of keeping the rate flat. • The US Treasuring Secretary is in China for a 4-day visit to discuss trade and investments to relax tension between China and US. Reuters quotes Xinhua that Xi Jinping urged the military to deepen war and combat planning to increase the chances of victory in actual combat. • The 3-month forward investor confidence index is stable, with the new government expected to be formed and recovery in tourism. Drags are political uncertainty and conflict between nations. • The ERC is looking at three possible scenarios for electricity price in Sep-Dec 2023: reducing price by more than or less than Bt0.20/unit or keeping it at Bt4.70/unit. Public hearings will be held Jul 7-21. • The EV Board expects the new government to approve EV 3.5 promotion starting on Jan 1, 2024, to include discounts in imported EVs, requiring well-known brand manufacturers to produce 2-3 times more EVs domestically than the number imported and providing benefits for EV manufacturers. |
| Strategy today |
Even though the SET is likely to recover, upside is limited due to domestic risks, particularly with regards to politics: the upcoming vote for PM, fund outflows from financial markets that are weakening the baht, which affects investment in large-caps, and external risks such as concerns that central banks are signalling a continued rise in interest rates, which may bring on a global recession. We recommend “Selective Buy”. |
| Trading today |
Weekly portfolio: External and domestic risks continue to pressure, limiting the SET’s upside. We recommend “selective buy” in themes with positive drivers: 1) Stocks whose 2Q23 profit is expected to grow YoY – AOT, BBL, ADVANC, MINT, OSP, BDMS and BEM. 2) Stocks with strong fundamentals that are seen as having high dividend potential with 2023 dividend yield of over 5% - TISCO, LH and AP. 3) Stocks able to step back up a month after the sharp fall since the May 14 general election – BH, BTS, CHG and CPALL. 4) Stocks expected to benefit from a weakening baht – AH, NYT and ERW.In the short term we recommend avoiding investment in: 1) power plants and PTT group stocks as there is risk of a change in the energy price structure in the new government’s policies, and 2) stocks expected to be affected by El Nino in Commerce (GLOBAL), Finance (MTC, SAWAD), Automotive (SAT, STANLY), Beverages (CBG, where sugar plays a leading role in cost), hydropower (CKP) and Food & Agricultural (CPF and GFPT). |
| Daily Focus |
LH: 2Q23 profit is expected to recover QoQ, and presales will start to recover as 80% of the planned Bt35bn (+8%YoY) in launches in 2023 will be launched in 2H23. Plus, there is upside risk from the planned sale of two hotel assets to LHHOTEL in 4Q23.HTC: Earnings outlook for the rest of the year is bright. 2Q23 profit is expected to grow YoY but be flat QoQ, with 2023 profit expected to reach a record high of Bt629mn (+45%YoY) upon the release new products, distribution of goods to more tourist areas and better cost management. |
Today’s reports |
AP – 1H23 presales achieved 41% of 2023 target |
