Upside is limited for the SET, with a push in big caps starting to weaken and as they enter overbought position, while a strong baht compared to the region leads to concerns about exports. Resistances are between 1460-1465, while supports which are used as following points are at 1446 and 1440. It the index falls below this, the market is expected to rest. |
• BoJ maintained its policy rate at 0.25% as expected. A rate hike is anticipated at the next meeting. Japan core CPI rose for the fourth month to 2.8%YoY in August.
• PBOC kept its 1-year and 5-year LPR unchanged at 3.35% and 3.85% respectively, contrary to market expectations of a rate cut. A former PBOC advisor said China might issue special long-term government bonds worth about 10trn yuan over the next two years to stimulate the economy.
• China's National Bureau of Statistics says the unemployment rate for young people (16-24 years old) increased to 18.8% in August from 17.1% in July. The unemployment rate for the 25-29 range rose to 6.9% from 6.5%.
• Federal Reserve Governor Christopher Waller supported the 50bps interest rate cut at the recent meeting due to faster-than-expected inflation slowdown. Recent data suggests inflation may decrease further, allowing the Fed to focus more on supporting the labor market.
• The Governor of the BoT said it is not necessary to reduce interest rates in line with the Fed. The BoT takes into consideration Thai economic trends, inflation framework and financial stability in its decisions.
• The Medical Hub Board is preparing to meet in October to consider a draft bill to promote Thailand as an international health center and medical industry hub over the next 10 years. The Global Wellness Institute reports that Thailand's wellness economy is valued at Bt1.2tn.
• Hezbollah and Israel continue to engage in retaliatory attacks following simultaneous pager explosions across Lebanon last week. |
In the short term the SET is expected to move sideways up and has limited upside, supported by the cut in interest rate and expectation of economic stimulus by the government. Short-term baht appreciation is also expected to support greater investment in the Thai capital market compared to the region as fund flows in September show foreign flows turning from net sell to a buy of more than Bt30bn. However, Asian economies, especially China, are still weak. Our strategy is "selective buy". |
The SET is expected to move sideways up but have limited upside in the short term, with funds expected to flow into defensive stocks and those with specific drivers. We recommend "Selective Buy" with four main themes:
1) Investors who want to speculate in stocks with signs of a turnaround and attractive valuation, with PER and PBV lower than -1SD - AOT, CRC, AWC, BCH and BEM.
2) Investors who want to speculate in stocks benefiting from rehabilitation efforts after the floods - HMPRO, GLOBAL, CPALL, BJC, DCC and TASCO, with data showing an average return of 5% for those speculating from mid-September to early November in years with La Nina in 2010-2023 (except 2020 which was derailed by COVID-19).
3) Investors who want to speculate in stocks expected to benefit when the interest rate cycle starts down - Leasing (MTC TIDLOR), Property Development (AP), Commerce (CPALL), Utilities (GULF) and REITs (LHHOTEL and DIF).
4) 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. |
GULF: Profit is expected to continue growing for the rest of the year, supported by new installed capacity at GDP unit 4 (662.5MW, COD in October) and a solar project. We are positive on the merger of GULF and INTUCH; valuation is attractive, trading at PER of 28x (-1.0SD), and the stock benefits from declining bond yield.
AOT: Stock price is expected to recover after removing the overhang of the duty-free shops at arrivals, with profit growing in line with the tourism industry. FY4Q24 (Jul-Sep 2024) core profit is expected to grow YoY, with 2024FY core profit estimated at Bt19.3bn, growth of 109%. |
