Little downside seen for Thai bourse

business May 08, 2017 01:00

By Therdsak Thaveeteeratham
Executive Vice President / Research
Asia Plus Securities

Thai listed companies have been gradually announcing their firstquarter financial results, and this week is expected to see more.

Listed firms are required to deliver their financial statements for the three months ending March 31, 2017, by May 15. As of May 4, companies representing about 31 per cent of market capitalisation had file their financial statements, reporting combined net profit of Bt108 billion. That figure is relaฌtively favourable, compared with our research team’s 1Q17 netprofit forecast for less than Bt230 billion.

This figure could confirm our fullyear netprofit forecast of Bt991 billion or Bt101.36 per share.

Based on the current environฌment, the SET Index’ downside is relatively limited and any drops will likely be investment opportuฌnities.

Another domestic factor that should be monitored this week is the progress of state megaprojฌects.

In regard to the doubletrack railway project, the State Railway of Thailand closed the hearings on terms of reference (TOR) for the Bt7.3billion Hua HinPrachuap Khiri Khan route on May 5. If there are no revisions of the TOR, the next process is invitation for purchase of bidding documents, and this is the formal beginning of the tender.

We believe we will see progress on the TOR for the remaining four doubletrack routes worth about Bt90 billion. Such progress would be a major drive for Thai economic growth and would ignite investฌment in construction and conฌstructionmaterials stocks for one more round.

There could also be progress on other megaprojects including on urban rail and investment in the Eastern Economic Corridor.Externally, attention is focused on the French presidential election. Moneymarket investors’ expectations on France’s continuing membership in the European Union after the election has been priced in.

The euro late last week appreciated against the US dollar. If there is no change in the euro’s direction, it is believed there will be less exchangerates volatility, which could prompt foreign capital to move into risky assets and emerging markets including the Stock Exchange of Thailand.

 This week, the SET Index is expected to move in a narrow range of 1,5601,585 points with a “selective buy” strategy.

Stock picks: good performance – SYNTEC (Syntec Construction), IRPC; turnaround stocks – RS and JWD (JWD Infologistics) . Stocks expected to be included in SET50 Index – BJC (Berli Jucker) and RATCH (Ratchaburi Electricity Generating Holding).

Chaiyaporn Nompitakcharoen

Head of NonInstitutional Broking Group

Bualuang Securities

The Stock Exchange of Thailand has remained in a narrow trading range of 1,5601,580 points even firstquarter financial results released so far have implied a forthcoming upgrade in market earnings estimate for 2017.

On the macro front, we are quite comfortable with improving export values across Asia including Thailand and increases in tourist numbers. Consumer confidence is strong.

The key concern is whether a recovery of domestic spending will be sustained given concerns over farmer incomes and how tough US policy regarding excessive trade deficits will be on Asian economies.

Oil prices should be contained this year amid global crudeoil gluts. Therefore we expect that the SET should be able to test a resistฌance level of 1,600 points soon.

Prakit Sirivattanaket

Vice President

Kasikorn Securities

The meeting of the US Federal Open Market Committee of May 23 had the following results.

1. The Fed maintained its benchmark interest rate at 0.751.00 per cent as expected.

2. The US labour market conฌtinued to grow despite the ecoฌnomic slowdown. US inflation was close to the target of 2 per cent.

3. The Fed noted a temporary economic slowdown in the first quarter, driven by sluggish conฌsumer spending, which usually happens during the early months of a year.

4. The Fed continued to forecast US economic expansion in the next periods, which will support its planned gradual interestrate rises. Two increases are expected this year.

5. The Fed continued to reinvest in mortgagebacked securities and expired government bonds.

After the FOMC meeting, marฌkets expressed relatively high conฌfidence for an interestrate rise again after the June 1314 FOMC meeting. Fed Fund Futures’ probaฌbility climbed to 90 per cent (from 67.1 per cent a day earlier).

KS Research expects either one more US rate rise in June and a Fed statement involving a balancesheet reduction or a waitandsee attitude on President Donald Trump’s taxcut policy before makฌing a decision on a rate increase in November or December.

The US dollar has been bought back as expected for market confiฌdence on the interestrate direcฌtion, easing concerns over geopoฌlitical tensions among the United States, Syria and North Korea, problems over the US publicdebt ceiling and improved political staฌbility in the Europe.

However, signals for Thai ecoฌnomic growth remain weak. KS Research maintains its GDP growth estimate at 3.1 per cent for the first quarter of 2017.

As a result, the baht has a chance of depreciating consistentฌly, and this could prompt capital outflows and pressure the SET Index throughout May.

The US dollar’s appreciation has also pressured commodities to see consistent corrections.In regard to US employment, markets will likely have a positive response to improved job figures, which could strengthen the dollar and become a negative factor to commodities with expected continued corrections.