Sawasdee – October 1, 2024

Resting, no new catalyst

The SET is resting, and lacks a new catalyst, limiting upside. Resistances are at 1460 and 1470. The closure of China's markets during its Golden Week will reduce trading value, while the market watches for reports on consumption after the holidays. Be cautious of downside to the index with supports at 1440 and 1435.

Resting, no new catalyst


Today’s highlights
• Middle East tensions continue, with Israel informing the US that it will soon begin limited ground operations against Hezbollah infrastructure along the Lebanese border. • The Fed Chairman said the Fed is likely to reduce interest rates by 25bps twice for a total of 50bps by year-end if economic data is as expected. The Fed will not rush, as new data shows continued growth in the economy and spending. • South Korea reported August chip inventories fell by 42.6%YoY, the steepest decline since 2009, while production and shipments expanded by 10.3% and 16.1%, reflecting continued demand for AI chips. • The BoT has intervened to manage the baht after a rapid appreciation and high volatility compared to regional currencies, aiming to reduce the impact and raise international reserves. August's economy remained stable, with recovery expected to be underwritten by tourism. The private sector expressed concerns about the strong baht. • Google announced plans to invest Bt36bn in Thailand by 2029, creating 14,000 jobs and adding Bt140bn in economic value. It plans to establish its first data center in Thailand, viewing the country as a promising hub. • The Thai Retailers Association estimates 10-20% of digital wallet spending by vulnerable groups will be on consumer goods at supermarkets and retail stores, amounting to Bt14-20bn. • The TAT expects 132,000-183,000 Chinese tourists during China's Golden Week (Oct 1-7), an increase of 57-144%YoY, generating revenue of Bt3.71-5.18bn, reaching 85% of pre-COVID levels in 2019.
Strategy today
In the short term the SET is expected to move sideways up but may face profit-taking after sharp rises in stock prices as well as external factors. The market will be boosted by the start of the cyclic downward in interest rate (Finance and BoT will discuss this week), government stimulus and baht appreciation that is expected to continue aiding fund inflow. The SET is expected to surge if funds flow into banks, Property, Electronics and tourism-related stocks; stocks offering good returns are expected to continue to perform well. However, US and China PMIs are expected to slow down. Our strategy is "selective buy".
Trading today
The SET is expected to move sideways up but may face profit-taking in stocks that have moved up sharply as well as on external factors. We recommend "Selective Buy" with four main themes: 1) 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. 2) Desire to speculate in stocks poised to benefit when the interest rate cycle starts down - Leasing (MTC TIDLOR), Property Development (AP SIRI), Commerce (CPALL), Utilities (GULF) and REITs (LHHOTEL and DIF). 3) Desire to speculate in stocks benefiting from flood repairs - HMPRO, GLOBAL, CPALL, BJC, DCC and TASCO, with data showing an average return of 5% for those speculating from mid-Sep to early Nov in years with La Nina. The baht appreciation in 3Q24 will hurt companies that are primarily exporters, and we suggest avoiding these stocks in the near term: TU, GFPT CBG and KCE. Those who want to speculate on companies that benefit from baht appreciation may choose AAV, GULF, GPSC and BCP.
Daily top picks
AOT: 4QFY24 core profit is expected to be Bt4.1bn, growing 14%YoY on greater numbers of international passengers, but declining 10%QoQ on less concession revenue. Profit momentum is expected to be stronger YoY and QoQ in 1QFY25 due to high season of tourism industry and a catalyst from China's Golden Week. BBL: Our top pick in the bank sector. Its valuation (PBV & ROE) is attractive, while quality asset risk is lower than others. 3Q24 core profit is expected to grow 5%YoY and 1%QoQ, supported by lower provisions (credit cost) and growing loans and non-NII (gains on financial instruments).
Today’s reports
Telecom - Not time to exit the building Residential Property - Presentation AOT - Preview 4QFY24: Earnings uptrend