Sawasdee – November 12, 2024

Limited recovery, still has downside

Today’s highlights

• China's Ministry of Commerce announced temporary anti-dumping measures against EU brandy, which has damaged China's industry and is seen as retaliation after EU's put tariffs on Chinese EVs. The measures will take effect on November 15.
• China FDI in 3Q24 decreased by US$8.1bn as foreign companies gradually withdrew some investments due to geopolitical tensions, a negative outlook on China's economy and intense competition.
• Goldman Sachs says Trump's election victory will affect markets across Asia and predicted continued relocation of manufacturing bases from China to Southeast Asia, India, or Mexico.
• Nikkei Asia reported seven major Japanese automakers' combined net profit in 3Q24 fell 57%YoY, the first decline in eight quarters, after sales contracted 4%YoY. Despite support from a weaker yen, this was not sufficient to offset rising costs and pressure from aggressive Chinese EV competition.
• The US Bureau of Safety and Environmental Enforcement reported that more than 25% of crude oil production and 16% of gas production in the US Gulf of Mexico remained shut down due to Hurricane Rafael.
• Sources revealed yesterday, the BoT's board selection committee voted in Khun Kittiratt Na-Ranong, former Deputy Prime Minister and Finance Minister, as the new BoT board chairman. The decision will be presented to the cabinet for approval before royal appointment.
• The government expects a bustling Loy Krathong Festival in 2024, with flight bookings surging 36%YoY throughout November, totaling 73,500 flights or an average of 2,450 flights per day.

Strategy today

Although in the short term the SET is expected to move sideways-up due to limited overseas and domestic pressure, US inflation is expected to slow down, which suggests interest rates will continue to come down. The passage of the US election is expected to support continued improvement in the market. Expectations of the impact of policies from the new US government on macroeconomics will cause the market to be more volatile and may affect fund flow direction, especially policies related to China. Domestically, the market is expected to be driven by the final week of 3Q24 earnings reports. Our strategy is "selective buy".

Trading today

In the short term the SET is expected to move sideways up due to weaker pressure, both overseas and domestic. The market is expected to be driven by the final week of 3Q24 earnings reports. We recommend "Selective Buy" with four main themes:
1) Earnings plays: stocks for speculation in the final week of 3Q24 earnings reports, on which we rate Outperform with strong fundamentals and 3Q24 profit - AWC, BDMS, TIDLOR, CPALL, BEM and AOT.
2) Stocks that benefit from Trump's win - AMATA and WHA (tax wall, manufacturing relocation), and CPF AOT and MINT (cutting revenue tax, increasing purchasing power, while benefitting from dollar appreciation).
3) Stocks with high dividend yield and expected to be targets of the Vayupak and tax-deductible funds (SSF, RMF and ThaiESG) and with following characteristics: dividend yield of at least 3.5%, high SETESG ratings and high CG and earnings expected to grow - BBL, ADVANC, HMPRO and BCP. Recommend to buy on dip as prices have already moved up.
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

AWC: 3Q24 core profit was Bt288mn, surging 129%YoY and 42%QoQ, driven by strong hotel and services businesses and lower tax expense. Profit is expected to grow further in 4Q24, giving 2024 core profit growth of 57%; it is expected to grow another 23% in 2025 from better hotel operations. Strong profit will be a catalyst driving stock price.

BBL: Our only top pick in the Bank sector, on which we recommend Outperform. There are catalysts to stock price: 1) valuation is the most attractive; 2) credit cost is likely to fall with upside from loans to THAI; 3) loan growth is expected to outperform the sector; 4) upside to NIM and; 5) high possibility dividend will be raised, giving further upside.