InnovestX Data book – July 2023

In July we expect the SET to swing broadly in a range with upper bounds at 1,530 and 1,570 and lower bounds of 1,460 and 1,440. There are two key factors driving the market: 1) the formation of the new government and votes for the Prime Minister; and 2) the FOMC’s move after Fed officials indicated they expect to make at least two more quarter-point interest rate hikes before the yearend. We believe SET downside is limited as it is already undervalued.

Bank earnings preview for 2Q23: up YoY but down QoQ. We expect 2Q23F sector earnings to slip 6% QoQ (lower gain on financial instruments) but rise 7% YoY (higher NII on better NIM). We expect BBL to report the strongest earnings growth in 2Q23 (+56%YoY, +8%QoQ) and 2023. Our 2023 forecast growth is 13% off 4% loan growth and a 23bps increase in NIM. Credit cost is expected to inch up 6 bps while non-NII will be stable. Cost to income ratio will drop slightly.

In Jun, foreign investors were net sellers for the fifth month of Bt9.1bn, versus a net sell of Bt33bn in May. The proportion of holdings in BANK, PETRO and ICT increased while with holdings reduced in ETRON, COMM and PROP. The performance of MSCI Thailand was better than MSCI APAC ex. Japan in the past 12-month period but was worse in the 1-month, 3-month and 6-month periods. Consensus has adjusted the SET’s 2023 earnings forecast down by 1.78% and also lowered Hong Kong by 3.26%, Taiwan by 2.14%, Singapore by 1.41%, the Philippines by 1.12% and Malaysia by 0.58%; Indonesia’s forecast was raised 0.22%.

Starting 3Q23, we maintain defensive and selective plays. The SET will swing broadly in response to the economic slowdown and doubt over 2Q23 earnings, so we recommend defensive plays on stocks with gradual earnings recovery or those whose earnings passed bottom in the first quarter. Companies with high pricing power and limited impact from the new government policies will be advantaged. We also recommend cyclical stocks that are likely to provide better returns than big-caps.

This month:Domestic: 1) Jul 5 – CPI for Jun; 2) Jul 7 – Consumer Confidence for Jun; 3) Jul 27 – trade balance for Jun. Foreign: 1) Jul 3 – US ISM manufacturing PMI for Jun, CN Caixin manufacturing PMI for Jun; 2) Jul 6 – US ISM services PMI for Jun, US ADP non-farm payrolls for Jun; 3) Jul 7 – US non-farm payrolls and unemployment rate for Jun; 4) Jul 12 – US CPI for Jun; 5) Jul 13 – US PPI for Jun; 5) Jul 17 – CN GDP for 2Q23; 6) Jul 25-26 – FOMC meeting; 7) Jul 27 – ECB meeting.