Must close above 1,470 to turn around |
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Market today | The SET is expected to continue to recover after ADP nonfarm employment came in lower than expected, helping to ease concerns the Fed will raise interest rate again. Resistance is at 1,455 and an important following point is 1,470. If the index can close above that, there will be a turning signal, otherwise it will be just a switch and will continue to fall. Supports are at 1,440 and 1,430. | Today’s highlights | • US ADP nonfarm employment in Sep increased by 89k, lower than expected. Services PMI by ISM in Sep declined to 53.6 as expected, and factory orders in Aug increased by 1.2%MoM, higher than expected.
• Eurozone retail sales in Aug declined by 1.2%MoM and 2.1%YoY, lower than expected, as high inflation eroded purchasing power.
• OPEC+ voted to keep oil production unchanged from June, meaning a total production cut of 3.66 MMbbl/day until the end of next year. Russia plans to ease diesel and gasoline export restrictions in place since the end of Sep. The EIA reported an increase of 6.5 MMbbl in gasoline inventory last week, more than the expected 0.2 MMbbl.
• The BoT is concerned about Thailand’s long-term structural problem and recommends solving labor and educational problems and relax investment restrictions. It says it is ready to handle the baht weakening, which has been more volatile than the region, if it moves inconsistently with the country’s fundamentals.
• TPSO reports Thai inflation in Aug 2023 grew 0.88%YoY, one of the top 10 lowest in the world, with 133 economic zones already announced.
• JSCCIB has kept its 2023 GDP forecast at 2.5-3.0%, planning to submit seven programs to the government to help it push GDP to reach target. These include distributing the digital wallet directly to the target 40mn people using the “Pao Tang” application database and redirecting the rest of the Bt160bn for water management. | Strategy today | Although the SET is expected to rise in October on expectation of clearer government policies and recovery of China’s economy, in the short term the world economy is dull while US and EU economic data are showing signs of slowing, pressuring the Thai stock market to slow and suppress a recovery. Our strategy is “selective buy”. | Trading today | Weekly portfolio: This week the SET is falling heavily, pressured by weakening oil price and a dim world economy. Recently, the World Bank cut its GDP growth forecast for ASEAN countries, including Thailand, and this led to less enthusiastic investment and pulled the SET down to its lowest since 2021. We recommend “selective buy” in themes with specific drivers:
1) Speculative stocks: we suggest accumulating oversold stocks with good fundamentals and inexpensive valuation (2023F PER and PBV below 5-year average), whose prices will rebound with the SET – CPALL, TOP, CPN, BDMS and MINT.
2) Speculative stocks in the petrodollar theme that benefit from higher purchasing power in the Middle East as oil price rose 10% QoQ in 3Q23 – BH (more patients from the Middle East).
3) Speculative stocks as oil price stabilizes at a high level – PTTEP and BCP; caution is suggested for speculators if Brent exceeds US$100/bbl.
4) Stocks for investment whose 3Q23 profit is expected to grow with good momentum continuing in 4Q23 – BCH, HANA, KCE, AOT, ERW and KLINIQ.
In the medium term we recommend being cautious on stocks that are expected to be affected by El Nino, which will erode purchasing power in the agricultural sector: Commerce (GLOBAL), Finance (MTC, SAWAD), Automotive (SAT, STANLY) and Food & Agriculture (CPF and GFPT). | Daily top picks | GULF: 2H23 core profit is expected to grow YoY and HoH, supported by another IPP, GDP unit 2 (662.5MW), which will start up this month and profit share from Jackson Generation, which is expected to grow HoH from the loss of Bt359mn in 1H23 due to low electricity price.
SCGP: In the short term it is expected to benefit from lower energy price. Stock price has plunged 36%YTD, incorporating the negatives. Core profit is expected to improve steadily over the next 1-2 quarters, which will limit downside risk. | Today’s reports | BCH – Strong outlook. Targets 20 hospitals by 2028. |
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