A selling spree from local institutional and foreign investors significantly pressured down the SET Index last week due mainly to uncertainties over the trade war, money market fluctuations which led to US bond yield’s inverted yield curve, and profit-taking in Thai energy stocks after the bid result for the gas fields in the Gulf of Thailand.
Executive Vice President / Research
Asia Plus Securities
This week is expected to see the same factors – trade war and meetings of several countries’ central banks which are expected to run a more tightening policy. The Fed is forecast to hike the funds rate by 25 basis points and next year should be on watch.
There are mixed views over the December 19 Thai MPC meeting with less chance to see a policy rate hike in this round after lower-than-expected inflation announced for the latest month and still-low crude prices. If the policy rate remains unchanged in this MPC meeting, it will support the SET Index. The local political situation may see less weight on the Thai bourse but could be a support after a January 2 official announcement to hold an election.
In terms of market valuation, the SET Index is at 1,600 points, the market PER is 14.8 times at this year-end and 14.3 times at next year-end, the lower-than-normal levels and investors may gradually accumulate stocks for long-term investment. We still prefer the theme of domestic play. Our picks are retail: CPALL and BJC, ICT: DTAC, construction-construction materials: DCC, STEC and SEAFCO. - Therdsak Thaveeteeratham, Executive Vice President / Research, Asia Plus Securities
Move ahead to 2019 election.
The SET Index has risen an average of 1.8 per cent. It’s interesting that it has increased 3.7 per cent and 5.1 per cent on average about one week and one month after an election, respectively.
Based on the past four elections, the baht has appreciated 0.6 per cent on average about two month before an election and has appreciated 2.3 per cent on average in the month of an election. The SET Index has climbed in three to six months before the election and has advanced consistently by 3.7 per cent on average in one to two weeks after the election.
Aside from the election, the baht will likely get support from the BOT’s expected rate hike in 1Q19. Given narrower US-TH 10Y bond yield, capital could flow into fixed income instruments again. Based on one-year statistics, the SET Index has moved on the opposite of the baht with a correlation of -85 per cent. It means that if the baht appreciates, the SET Index will rise and if the baht depreciates, the SET Index will drop. In two months before the election, the baht is expected to appreciate and the SET Index is forecast to rise.
Due to less inflationary pressure which comes positively to domestic consumption and government stimulus, we like retail group: CPALL, ROBINS, BJC or hotel and food group: MINT, CENTEL. We also prefer AMATA for a certain election schedule, which could boost foreign investors’ confidence and certainty on urban development in the EEC. We also pick STEC, CK as already-approved megaprojects will likely speed up implementation next year. - Prakit Siriwattanaket, Vice President, Kasikorn Securities