Market View

  Thanawat Patchimkul
Head of Research
DBS Vickers Securities (Thailand)

As the world awaits more stable market conditions, Thailand remains resilient.
It seems like global investors are continuing to rebalance their portfolios and remain upbeat about the US’s economic prospects. 
After the US election, the US equity market has been in the limelight and has attracted significant inflows while bonds, emerging market equities and gold sold off. 
Foreign investors have sold Bt31 billion worth of Thai shares so far in November. For the year today, they remain net buyers of Bt84 billion in the Thai equity market. 
A similar situation is seen in regional markets, as their currencies weakened against the dollar and with their bonds and equities being liquidated on a large scale.
We believe the Thai market’s fundamentals are still strong. Thailand’s economic growth is performing below its potential but it still has solid fundamentals. Bloomberg cited the IMF’s forecast that projects Thailand’s foreign reserves hitting US$163 billion by the end of this year. According to a measure called assessing reserve adequacy, the Kingdom needs only $65 billion. 
The country’s huge foreign reserves are believed to have helped Thailand withstand the funds outflows. In comparison, other emerging countries like Malaysia, Turkey, South Africa, and Mexico might have relatively weaker foreign reserve cushions.
DBS economists point out the strength of the Thai economy lies with its current account surplus, which is expected to reach 10 per cent of gross domestic product in 2016 despite the fact that this measure reached a record-high level of 8 per cent of GDP last year. 
Given the country’s economic stability, we believe the Thai stock market will remain resilient going forward. Any broad-based weakness should be treated as an opportunity to accumulate solid stocks for long-term investment. 
Given the volatile market conditions, we prefer dividend stocks and recommend ADVANC/INTUCH, JASIF, DIF, CPNRF, CPTGF, AP, LH, SIRI, BCP, TCAP, TISCO, and TMT as our top income-oriented picks.

Tisco Securities

After a surprise rally that resulted in the SET being one of the region’s best performing markets in 1H16, Thai equities now look like finishing the year with a whimper following various negative events (the zero-dollar-tour crackdown, the expected Fed rate hike, and the mourning period for the King).
 Over the past two years, investors had plenty of reasons to ignore the Thai market due to worries over the health of HM the King, fears that anti-coup protests could lead to a new political crisis, lacklustre GDP growth and demanding valuations. However, as we move towards 2017, many of these downside risks have either been priced in or became irrelevant. 
Ironically, the Prayut government’s policy of “pivoting” towards China may have helped shield the country from the impact of potential US policy changes under a Trump administration. In addition a weaker baht is good news for Thailand’s export industry and economic exposure to the US is limited.
 Despite the likelihood of a US Fed rate hike in December, we believe the risk of fund outflows is not as bad as it was in 2015. Furthermore, we see a few positive catalysts that can drive the market higher in 2017. These include successful infra-project bidding, government stimulus measures, state enterprise reforms and progress towards the first general election in six years.
 For now, we’re sticking with defensive stocks (hospitals, insurance, telecom and contractors/conmat). We have also added AOT and PTT to our top-picks list as we think these stocks are most likely to re-rate out of the five listed SOEs once the State Enterprise Bill is approved in March/April next year.
 Our 2017 SET year-end target is now based on a forward 2018 P/E target of 13.8x. We also established a 2018 EPS target of 119. As a result, our 2017 target has been revised up by 3 per cent to 1650. Our 13.8x target is still a 0.5x standard deviation below the five-year historical mean forward P/E. Key risks to our call include macro shocks (such as a steeping yield curve from an accelerated Fed rate hike), a delayed Thai election and a worse than expected impact of the mourning period on Thailand’s tourism and consumption.

Research Department
Trinity Securities

This week, four key factors are expected to influence stock markets across the world.
They include an informal meeting between non-Opec and Opec tomorrow and an Organisation of Petroleum Exporting Countries meeting on Wednesday. We expect the Opec meeting to reduce the crude production capacity in a range of 250,000-750,000 barrels per day. If that happens, the impact will not be significant and crude may face sell on fact.
Another expected influencing factor is the global adjustment of MSCI on Wednesday. In this round, MSCI EM raises weight on Thailand slightly. Net foreign purchases are expected on the day but only one time.
Also,China’s PMI in November will be announced on Friday. Markets are expected the figure at 51.0. If the announced figure is significantly better than expected, commodities prices, particularly manufacturing metal, would rise again. The fourth influencing factor is Italy’s referendum on reform of the country’s constitution on December 4. If the vote is for no constitutional reform, Italy’s government, led by Matteo Renzi, would not be able to push for the urgent measures for economic reform and the Italian economy would face troubles. Renzi may resign as a result.
Investment strategy: The SET Index is expected to move sideways in a narrow range. Rises of the US bond yield will result in short-term pressure and the SET Index will see declining attraction in term of the earning-yield gap. A slowdown in investment in the overall picture. If investments must be made, select small and medium gaps with support themes.
1. Stocks with gains from baht depreciation: TFG, BR, SMT, SVI
2. Stocks with positive sentiment if the Cabinet approves tax measures late this year: BIG, COM7, JMART, KAMART
3. Stocks with gains from relief measures for low-income earners: GLOBAL, ROBINS, TNP, SINGER, TK, GCAP, DCC, DRT