Sawasdee – September 20, 2024

Market today

The SET rose in response to the Fed's interest rate cut and moved close to resistances at 1460 and 1470, limiting upside. Big caps that had already moved up also have limited upside, and banks have negative sentiment from the cut in NIM arising out of the interest rate cut, both factors dragging the market. Supports are at 1440 and 1433. A fall below would be a negative sign.

Today’s highlights

• The BoE voted 8-1 to maintain the policy interest rate at 5.0%, viewing that inflation still persists. It also voted to reduce bond holdings (QT) by £100bn over the next 12 months.
• The US Department of Labor reported initial jobless claims last week decreased to 219,000, the lowest in four months and lower than market expectations.
• Travel volume in China during the Mid-Autumn Festival holiday reached 630mn trips, +31.1YoY, with most being road travel.
• The Minister of Tourism announced readiness to continue the successful "We Travel Together" scheme. The TAT will prepare a new phase of the project to propose to the Economic Committee for the PM's consideration and budget approval.
• Yesterday was the deadline for submitting Virtual Bank license applications to the BoT. Applicants include: 1) KTB-ADVANC-OR group, 2) Lightnet-WeLab group, 3) Thailand Post-Sahaphat-BTS-VGI-Sea Group (Shopee's parent company), with pending confirmation from TRUE-Ant Group (Alibaba affiliate) and SCBX-KakaoBank-Webank group.
• The Condominium Association expects real estate sales in 3Q24 to slow down due to economic volatility, rapid baht appreciation affecting foreign customers and major developers delaying project launches this year.
• The Credit Bureau reported overall debt in August saw an increase in overdue payments, with overdue payments on housing loans up 18%MoM and on personal loans up 33%MoM. NPLs are expected to surpass Bt1.2tn in 3Q24.
• The Government Pension Fund (GPF) disclosed that it currently has less than Bt10mn invested in Vayupak Fund Type B and intends to redeem all investment units.

Strategy today

In the short term the SET is resting and has limited upside. There may be support from the Fed's interest rate cut, which will support short-term investment in risky assets. However, be cautious on the difference in the BoJ's monetary policy, which will bring yen carry trade and trigger selling of risky assets around the world while EM markets are uncertain. Domestically, the capital market will see fund flows into defensive stocks such as Commerce, Healthcare and Utilities. Our strategy is "selective buy".

Trading today

The SET is resting and has limited upside but may be supported by the interest rate cut by the Fed, which supports investment in risky assets. We recommend "Selective Buy" with three main themes:
1) Investors who want to speculate in stocks that have signs of a turnaround and an attractive valuation, trading at PER and PBV lower than -1SD - AP, GPSC, MTC and AMATA.
2) Investors who want to speculate in stocks expected to benefit when the interest rate cycle starts down - Leasing (MTC), Property Development (AP), Commerce (CPALL), Utilities (GULF) and REITs (LHHOTEL and DIF).
3) Stocks expected to benefit from the Vayupak Fund. We highlight stocks in SET100 that have: 1) good dividend yield of at least 3.5%, 2) SET ESG Ratings between A and AAA and 5-star CG and 3) a strong financial position, with profit expected to grow in 2025 - KTB, BBL, BCP, ADVANC and HMPRO.

Daily top picks

HANA: The company is expected to benefit from recovery of technology stocks and high demand for iPhone16 in Thailand. 2H24 profit is expected to grow HoH, backed by strong demand from the smart phone replacement cycle with added AI features. The stock is currently trading at a PE close to the average of 19.1x. Recommend to buy for trading at not higher than Bt41.50/share.
AWC: 2H24 profit is expected to grow YoY on higher revenue from better ARR, higher margin and opening of three new hotels that increases rooms by 14%YoY and will back 23% profit growth in 2025, outperforming peers. Although the stock price has risen, valuation at PBV of 1.48x is still lower than average by more than -1SD.

Today’s reports

Healthcare - Expansion to drive long-term growth; Healthy earnings makes BDMS our top pick