AFTER a disappointing May in which the SET Index fell 3 per cent, the Thai market saw a small rebound last week.
This was mainly due to an improvement in global risk appetite, aided by the US reporting its lowest trade deficit in seven months. This has raised investors’ hopes that the US may reach some compromise with its major trading partners and not drag them into a punishing global trade war.
Meanwhile investor confidence in Thailand looks to have improved after the Constitutional Court ruled that Order No 53/2017, which requires political party members to reconfirm their membership as well as pay membership fees by April 30, does not violate the Constitution. This follows the court’s recent approval of both the Senate selection and MP election bills, thereby paving the way for new elections in early 2019.
Note that central bank data for April showed that Thailand’s economic recovery is continuing to gain traction. Private consumption expanded +5.9 per cent year on year, showing improvement in all spending categories except non-durable goods. Private investment also gained momentum, with imports of capital goods, domestic machinery sales and car sales seeing double-digit growth.
For IVL, our top pick in the energy space, we have revised up 2018-20F earnings by 4-5 per cent to factor in the company’s acquisitions of the Suape plant in Brazil, Corpus Christi plant in the US and Avgol in Israel. We also raised our target price slightly to Bt67.
In the banking sector, we have revised up our 2019 earnings forecast for KBANK by 6 per cent and upgraded our rating to “Buy” as we now believe it is the only bank that can go ahead with full adoption of IFRS9 even if its official adoption gets delayed for a year.
We also like selective residential property stocks such as LH and QH, which should benefit from robust demand for low-rise projects, and AP, which has already achieved 45 per cent of its full-year presales guidance in the first five months of 2018.