Sawasdee – July 20, 2023

Market today

Upside is seen as limited in the short term, with resistances at 1,545 and 1,555 and technical indicators are entering overbought and weakening. The index will face profit-taking to averse risk and uncertainty from politics which may cause the weakening. Supports are at 1,527 and 1,518.

Today’s highlights

• The parliament was not able to propose Mr. Pita as a nominee for PM because a motion repeated cannot be repeated. The next vote will be on Jul 27. The constitutional court agreed to accept the case against Mr. Pita’s media holdings and suspended him as an MP.

• The BoT said the delay in formation of a government will damage foreign investor confidence and is concerned about the high level of household debt. On Jul 21, the BoT plans a measure to sustainably resolve household debt, changing the behaviour of borrowers and lenders.

• ADB adjusted Thailand 2023 GDP forecast to growth of 3.5%. The Foreign Business Committee approved investment totaling Bt49bn by 326 foreigners in Thailand in 1H23, up 15%.

• FedWatch Tool shows a 99.8% probability the Fed will raise interest rate by 25bps to 5.25-5.50% at its Jul 25-26 meeting, and 0.2% probability it will keep the rate flat.

• US housing starts in Jun declined by 8%MoM, worse than expected, while US building permits in Jun fell 3.7%MoM.

• EIA reported a decline in US crude oil inventory last week of 0.7 mnbbl, less than the expected drop of 2.5 mnbbl.

• UK CPI in Jun slowed more than expected to a one-year low.

• Russia will not negotiate a grain export deal via the Black Sea if the UN does not meet Russia’s requirements to export its agricultural products within 3 months.

• Netflix and Tesla reported misses in 2Q23 profit.

Strategy today

In the short term the SET will continue pressured by politics, as there is still no new government. Concerns from external factors – a slowdown in the global economy and monetary policy - have begun to ease to some extent. We recommend “Selective Buy”.

Trading today

Weekly portfolio: Investors are waiting for clarity on politics, affecting the SET. We recommend “selective buy” in themes with positive drivers:
1) Stocks whose 2Q23 profit is expected to grow YoY – BBL, ADVANC, 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) For investors who can handle risk, recommend speculate in stocks in case the political scene shifts – GULF, GPSC, CPALL, SIRI and SC.
4) A fall in the SET to 1,450 is seen as an opportunity to buy stocks whose prices have fallen deeply and have been trading at PER and PBV of below -1SD – CRC, SCGP and OR.
In the short term we recommend avoid investment in: 1) Food (TU, CPF GFPT and BTG), which is seen by the market as likely to be downgraded as 2Q23 profit is expected to weaken QoQ and YoY; 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 & Agriculture (CPF and GFPT) and 3) Tourism stocks that may be negatively affected by politics.

Daily Focus

CPALL: 2Q23 core profit is expected to grow YoY on better sales at the CVS business and CPAXT, but to decline QoQ due to seasonal factors. 2H23 profit is expected to grow HoH on lower interest expense after refinancing CPAXT’s debt at the end of April.
HTC: Profit direction for the rest of the year is bright. 2Q23 profit is expected to grow YoY and be stable QoQ. 2023 profit is expected to make a record high of Bt629mn (+45%YoY) from the introduction of new products, more distribution to tourist areas and better cost management.

Today’s reports

TTB – 2Q23: Beat on NIM, non-NII and credit cost