Sawasdee – October 24, 2024

Facing pressure, starting to rest

Today’s highlights

• EIA reports US crude oil inventories rose by 5.5mn bbl to 426mn bbl, higher than market expectations. Gasoline stocks increased by 900,000 bbl to 213.6mn bbl, contrary to market expectations of a decrease.
• US 10-year Treasury yield touched 4.255%, the highest in three months, after several Fed officials supported cautious monetary policy and gradual interest rate cuts.
• US existing home sales in September fell 1.0% to 3.84mn units, the lowest in 14 years, due to high home prices and potential buyers delaying purchases hoping for lower mortgage rates and uncertainty about the US presidential election.
• China announced Shanghai, Beijing, Guangzhou, Tianjin and Chongqing as five cities that will host month-long consumption promotion activities in November as part of government efforts to boost consumer spending in areas such as shopping, food, and tourism.
• IMF reduced China's 2024 GDP forecast from 5.0% to 4.8% and 4.5% for 2025, warning that the real estate market could worsen more than expected. For Thailand, it projects growth of 2.7% this year and 3.0% next year.
• A Chinese policy planning institute called for the government to issue 2tn yuan in special bonds to establish a stock market stability fund. The PBOC governor revealed they are studying the feasibility of this proposal.
• The BoT governor explained that the recent interest rate cut was due to slowing credit growth and is not the beginning of a rate-cutting cycle, signalling no rush to cut rates at the next meeting.

Strategy today

In the short term the SET is expected to move sideways. The index rose to 1500 after the MPC cut interest rate, and the market is expected to have a steady push from US earnings releases, which are expected to be stronger than expected due to low expectations. However, upside is seen as limited as we enter 3Q24 earnings season, while the market is waiting for additional stimulus. Next week economic figures to be reported are US real estate and manufacturing PMI which are expected to slow down. Our strategy is "selective buy".

Trading today

SET upside is limited for the short term as we enter the 3Q24 earnings season and as the market waits for a new catalyst. We recommend "Selective Buy" with four main themes:
1) Earnings plays: stocks with strong fundamentals and strong 3Q24 profit - BEM, BCH, BDMS, GULF, TRUE, AU and TNP. Be cautious on sectors that are likely to come in below expectations - Energy, Petrochemicals, Packaging and Electronics.
2) For risk takers who want to speculate after the MPC cut interest rate, we recommend LHHOTEL, DIF, CPALL, AP, SIRI and SPALI, which is expected to benefit from a new loan measure of Bt3mn per person, TISCO and KKP who have large leasing portfolios, and GPSC and BAM, who benefit from lower financial costs.
3) 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, HMPRO and BCP.
4) For investors who are concerned about tension in the Middle East and want oil stocks to hedge the risk, we recommend an upstream oil stock - PTTEP.

Daily top picks

BCH: 3Q24 profit is expected to grow QoQ and YoY due to high season, hospital expansion and renovation and better operations at the new hospital. Valuation is attractive, trading at 2025F PER of 21x (-2SD). Core profit is expected to grow 13% annually in 2024-2026, the strongest of hospitals offering social security services.

KCE: In the short term, stock price will react positively to the weak baht, lower copper cost and news regarding recovery of world chip manufacturers with earnings beats, such as Texas Instruments and Tesla. Stock price has declined and incorporated the negatives, limiting downside. Recommend to buy for trading at not higher than Bt36.75/share.

Today’s reports

Bank - Under pressure from NIM squeeze ahead
WHA - Preview 3Q24: Net to rise YoY, drop QoQ