The SET Index gained 3.4 per cent in the last two weeks to close at 1,457 points on Wednesday.
The SET strongly outperformed regional peers, represented by the MSCI Asia ex-Japan Index, which inched up 0.7 per cent in the period.
Foreign investors turned net buyers with an aggregate net buy position of Bt4.9 billion after selling aggressively in the first five months of the year.
Sentiment has been improving steadily amid increasing optimism that the economy has bottomed out and would start picking up next quarter, premised on the announcement over the last few weeks by the National Council for Peace and Order (NCPO) that it would implement several measures to stimulate the economy.
The consumer confidence index trended up for the first time in 14 months. FDI should also start to revive following the appointment by the NCPO of the Board of Investment members to clear the backlog of over 400 investment applications worth over Bt700 billion. The military has also lifted the curfew nationwide to alleviate the impact on businesses.
Looking forward, we expect the Money Policy Committee (MPC) to keep the policy rate at 2.0 per cent at its Wednesday meeting, now that the economy is on a recovery path. In fact, we expect the MPC to hold the rate steady for the rest of the
year, before policy normalisation in the second half of next year.
In terms of sector and stock selection, we are now more positive on domestic plays, which should benefit from improving consumer confidence, recovering consumption and a revival of investment.
Our preferred sectors are banks, property and transportation. Our top 10 stock picks are BBL, KBANK, SPALI, QH, AP, CPN, AMATA, HEMRAJ, SCC and AOT.
The SET Index moved with volatility last week. Above 1,450 points, sales came mainly from local institutional investors. This month, Bt8-billion trigger funds are preparing their closing. We expect sales from the funds to be offset by local investors demanding high-risk assets and foreign purchases expected to be into the stock market as a result of the euro carry trade in the next periods.
The SET will move with volatility this and next week, given no new factors, before going up in the last week of the month on window dressing.
Commercial banks with large market caps are targets for window dressing. We continue overweighting banks due to expected loan expansion following Thailand’s economic recovery (SCB, KBANK, KKP) and groups that gain from local purchasing power and recovering consumer behaviour and the NCPO’s cancellation of curfew across the nation.
Those groups are retail (CPALL, BJC, SINGER), finance (AEONTS, GL, TK) and tourism (MINT, CENTEL, ERW, AOT, AAV, NOK).
Next week, we will be monitoring the following factors – the MPC meeting on Wednesday and the FOMC meeting, whose result is expected to come out on Wednesday.
We expect the MPC to keep the policy rate unchanged at 2.00 per cent, as the country’s economy starts recovering and inflationary pressure builds up.
The Fed is expected to reduce its asset purchases by US$10 billion to the rate of $35 billion per month. This should give not much impact as it’s at a proper level.
We expect the SET to remain at satisfactory levels in July due to these factors:
_ Likely decline in sales of trigger funds
_ Higher liquidity in the country due to Bt90-billion savings bonds that mature next month with some capital expected to flow into the stock market
The support level is expected at 1,440 points. Those who need to make investments may accumulate stocks at this level.