Sawasdee – August 25, 2023

Market today

The SET rose to test 1,562 and was unable to break through; technical indicators thus signal a likely slowdown. Investors are waiting for the Fed speech tonight to evaluate interest rate direction. The index is likely to slow and become range-bound, with an upper bound of 1,562 and a lower bound at 1,550 and 1,540.

Today’s highlights

• Fed chair Jerome Powell will give a speech at the close of the FOMC meeting in Jackson Hole, expected to provide a signal for interest rate direction.
• US initial jobless claims decreased by 10,000 to 230,000 last week, better than the expected 240,000.
• US durable goods orders in Jul declined 5.2%MoM, the sharpest contraction since Apr 2020, after growing 4.4%MoM in Jun.
• The US Commerce Secretary plans to visit China next week to discuss resolving economic and trading problems.
• China has retaliates against Japan after it released radiation-contaminated water into Pacific Ocean by immediately suspending imports of seafood products.
• BRICS has invited Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and UAE to be new members, effective on Jan 1, 2024.
• FTI reports vehicle production of 149,709 (up 4.72% YoY) in Jul with exports of 86,552 (up 9.48%YoY). Domestic vehicle sales were 63,157, slipping 1.16%YoY after banks began to become more conservative on extending car loans.

Strategy today

The SET is expected to move within a range of 1,500-1,550 despite the finalization of a new government that has brightened the investment climate and the expected return of fund inflows to the Thai market. However, in the short term, global stock markets are expected to be pressured by concerns over a slowdown in the US and China economies and the statement by Fed Chair Powell during the Jackson Hole Symposium (August 24-26) for indications of the direction of US interest rates. This limits SET upside. The investment strategy is for "Selective Buy".

Trading today

Weekly portfolio: The SET is seen to have limited upside. While there is progress in domestic political factors, the market remains pressured by risks associated with the global economic slowdown. The investment strategy is “Selective Buy” as follows:
1) Highlighting eight standout stocks across four industries where earnings are expected to grow both HoH and YoY - PTT, BCP, KCE, HANA, BDMS, BCH, AOT, and ERW.
2) Stocks paying an interim dividend on 1H23 profit with ~2% yield – AH (XD on Aug 29).
3) For risk-tolerant investors seeking to speculate, choose stocks that are expected to benefit from returning fund flow - KBANK, GULF, CRC, and HMPRO.
In the short term we recommend avoid investing in 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), Beverages (CBG, where sugar plays a leading role in cost), and Food & Agriculture (CPF and GFPT).

Daily Focus

AOT: 4QFY23 (Jul–Sep 2023) profit is expected to grow QoQ and YoY as the number of international passengers increases and the resumption of the collection of the minimum guarantee for its concessionaires since April. FY2023 profit is expected at Bt9.6bn, leaping to Bt26bn in FY2024.
BJC: 2H23 profit is expected to grow YoY, supported by increasing sales volume in all businesses and higher margin, largely from PSC on a decline in natural gas cost. 4Q23 is expected to generate the highest profit in 2023 due to seasonal factors.

Today’s reports

BJC – 2H23 looking better for earnings