Sawasdee – October 15 , 2024

Highlights

• OPEC has reduced its oil demand forecast for the third time, expecting growth of 1.9 mbpd in 2024 (from 2.0 mbpd) and 1.6 mbpd in 2025 (from 7 mbpd).
• On October 12, China announced plans to significantly increase debt to stimulate its slowing economy, but did not disclose the size of the stimulus package, which is crucial for assessing the sustainability of the stock market recovery.
• South Korea reported that ICT product exports grew for the 11th month, with September exports up 24%YoY. Semiconductor exports increased by 36.3%YoY, driven by strong demand for AI chips.
• China's passenger vehicle sales in September reached 2.13mn units, +4.3%YoY, ending a five-month decline. Growth was supported by government subsidies that encourage people to replace old vehicles with new ones.
• The IEAT said the country needs to accelerate the development of industrial estate areas to meet increasing FDI demand. It hopes to increase FDI to 27% of GDP from 24%, potentially worth Bt350bn annually.
• The Thai Hotel Association reported that hotel occupancy rates fell in September compared to August due to a decline in foreign tourists. However, overall performance improved as the total number of tourists increased.
• Thailand's Deputy Finance Minister plans to propose economic stimulus measures targeting middle-class taxpayers by the end of October. The measures may include tax incentives to boost spending and support the real estate sector.

Strategy today

In the short term the SET is expected to move sideways with limited upside as the market waits to see the BoT’s interest rate direction. The MPC meets on Oct 16 and we expect a 25bps cut. The market is also hoping for additional stimulus from the government. There are specific external factors, including 3Q24 earnings releases by US and EU companies, less volatility in China’s stock markets and the ECB meeting on Oct 17, where a 25 bps interest rate cut is expected, with interest rate direction expected to remain the same. Our strategy is “selective buy”.

Trading today

The SET is expected to move sideways with limited upside, waiting for Thai interest rate direction and geopolitical tension, while banks at the same time begin releasing 3Q24 earnings. We recommend “Selective Buy” with four main themes:

• Earnings plays: strong fundamentals stocks with strong 3Q24 profit – BEM, BCH, BDMS, GULF, TRUE, AU and TNP. Be cautious on stocks that are likely to come in below expectations – Energy, Petrochemical, Packaging and Electronics.
• For risk takers, on expectations of a cut in rate by the MPC, speculate on LHHOTEL, DIF, CPALL, AP and SIRI; leasing (MTC, TILDOR) has already moved up, reflecting expectations. If you expect no rate cut, speculate on stocks with high debt/expenses in US dollars – AAV, GPSC and BCP.
• Stocks with high dividend yield and expected to be targets of Vayupak and tax-deductible funds; recommend stocks with profit expected to grow in 2025 – KTB, BBL, ADVANC and HMPRO.
• Rising Brent price on concerns of spreading Middle East conflict. We expect price to average US$75-85/bbl. Oil stocks are able to hedge the risk. For investors who can take risks, we recommend an upstream oil stock – PTTEP.

Daily top picks

BBL: Our top pick in the bank sector. It has the most attractive valuation (PBV/ROE) and lower quality asset risk 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 (financial instruments).

DELTA: 2H24 profit is expected to grow YoY and HoH from higher sales of more AI-related products. There is also upside from development and sale of AI-related power supply developed by DELTA Thailand, meaning it does not have to pay technical fees to DELTA Taiwan. Recommend to buy for trading at not higher than Bt120/share.