Sentiment will be positive after the overnight gains in US markets and hopes the Fed will start its interest rate cuts. However, political concerns and fund outflows limits the upper bound at resistance of 1345-1350; supports are at 1330 and 1320.

• Services PMI by ISM in May beat market expectations, rising to its highest since August 2023. ADP reported May private sector employment, which increased at its slowest since February and was lower than expected. This raises market hopes that the Fed will cut interest rates at the September meeting.
• The EIA reported US crude oil inventories increased last week, contrary to expectations of a decline, indicating weak fuel demand during the Memorial Day holiday which marks the start of US summer driving season.
• The Bank of Canada cut interest rates by 25bps to 4.75% yesterday, the first rate cut in four years, as inflation slows. It signalled further rate cuts if inflation continues to decelerate.
• The Joint Standing Committee on Commerce, Industry and Banking estimates Thailand's GDP will grow by 2.2-2.7% this year due to various risk factors that are hampering recovery. It supports short-term economic stimulus measures. On wages, it believes adjustments should align with the economy. It is concerned exports will be indirectly impacted by the US-China trade war. The PM expects the economy to improve significantly in 4Q24 and is preparing stimulus measures. Discussions are being held with tax authorities to expand tax collection channels.
• The Minister of Finance denied reports the digital wallet money will be distributed to 14.98mn of the poorest first, confirming it will proceed as originally planned with identity verification being split into groups.
• The Constitutional Court scheduled the next hearing in the case for dissolution of the Move Forward Party on June 12, after the party submitted its explanation against the allegations on June 4.

In the short term, the SET is still fragile and range-bound. Domestically, the market lacks a catalyst and is being pressured by politics, keeping it underperforming the region. However, there will be some support from the expectations of better profit in 2Q24 and positive external factors, such as May manufacturing PMI in China and US, which is expected to recover after several rounds of stimulus, and the June 6 ECB meeting, which is expected to see the first interest rate cut. Our strategy is “Selective Buy”.

The Thai capital market is still fragile as political risk remains in play. However, there is support lying in expectation of growth in 2Q24 profit and external factors to be reported next week will support. We recommend “Selective Buy” with four main themes:
1) Stocks whose 2Q24 profit is expected to grow YoY and QoQ, while valuations are attractive who are players in industries that have been able to outshine the market YTD – ICT: ADVANC; Tourism: MINT; and Food: TU, BTG and OSP.
2) Stocks expected to benefit from recovery in manufacturing, especially in China, whose profit has touched bottom but whose stock prices are yet to respond appropriately - KCE, SCGP and PTTGC.
3) For high-risk takers and those interested in small-cap, we select companies whose 2Q24 profit is expected to grow YoY and QoQ, whose valuation is attractive and who pay regular dividends – AMATA, AU, KLINIQ, TPAC and TNP.
4) Tension has eased about the situation in the Middle East, leading Brent down to the lower bound of US$80-90/bbl, which is seen as an opportunity to hedge. For high-risk takers, we recommend an upstream oil stock – PTTEP.

MINT: One of our top picks in the tourism sector. 2Q24 profit is expected to grow both YoY and QoQ as Europe enters its high season. Valuation is attractive, trading at 2024F PER of 23x or equivalent to -1S.D. of historical PER, not yet incorporating the 12% growth in 2024F core profit to Bt8bn.
MTC: The company will benefit when interest rates start moving down as it will reduce financial cost. 2024 profit is expected to grow 22% after slipping 4% in 2023, backed by 19% loan growth, lower credit cost and lower opex growth as it puts the brakes on branch expansion.