Kasikorn Securities (KS) has made an analysis for the trading session on November 1, 2019, pointing out some of the must-know events in the equity market as follows:
President Trump confirms phase one trade deal, to announce signing venue soon. The 10- year US bond yield fell 9 bps to 1.69% in tandem with declines in US shares on worries over a US-China trade deal after Chinese officials casted doubt on prospects for an agreement. However, KS remains optimistic an initial trade deal will be agreed given weak economic indicators of both countries. In particular, the US needs to avoid a tariff hike on Chinese goods in December to maintain its economic growth momentum.
KS expects the SET Index to move in a range of 1,590-1,610 pts as investors assess prospects of an initial US-China trade deal. Eyes will be on the release of US non-farm payroll data today, as a positive surprise (90,000 jobs expected) would bolster a recovery of bond yields.
Profit-taking on cyclical plays is possible today while funds could rotate back to power plays after US bond yields fell 7-10 bps overnight on renewed trade deal worries. KS recommends accumulate cyclical plays on a global recovery next year and high earnings growth prospects given a low base this year. KS sees limited upside for power plays in the medium term as bond yields have probably bottomed out and would suggest take profit on strength.
Top picks: BTS (closed Bt13.40/OP). BTS will pay Bt100bn for a 30-year extension of its Green Line concession. We estimate this will lift our fair value to Bt14.40. The debt burden will not affect other projects BTS is looking to bid for as it can monetize assets to BTSGIF.
ADVANC (closed Bt13.40/OP/TP Bt243.16). 3Q19 normalized profit beat our forecast by 4%, and we expect another strong quarter in 4Q19 as service revenue will likely be the highest of the year and ARPU come in higher. The reference price for a 5G license being 22% lower than expected and favorable payment terms (10% in the first year with a grace period in the second to fourth years) are positive. The NBTC will require more bank guarantees (from 10% of bidding price required for 4G auction) to mitigate risk of unreasonable competition. The stock still offers 6% upside and a dividend yield of 3-4%.
Investment strategy: Focus on the following stocks with positive catalysts and robust 2H19 prospects:
1) Stocks that will benefit from government measures: CPALL, BTS, ORI, TFFIF, STEC CK;
2) Dividend plays: JASIF, TISCO, LH, TCAP;
3) ICT plays that will benefit from less competition (more revenues, lower costs); TRUE, DTAC, ADVANC, INTUCH;
4) Stocks that will benefit from IMO 2020: TOP, PRM, BGC, TASCO;
5) Stocks that will benefit from a recovery in Chinese tourists: AOT, ERW, MINT, CENTEL; and
6) Stocks with specific catalysts: CPF, GUNKUL, TPCH, JAS, OSP, TKN, MEGA, TU, GFPT, BDMS, IVL, RBF, MAJOR.
Key economic factors to monitor next week:
Eurozone October PMI manufacturing on Monday (45.7 expected); US September trade data on Tuesday (trade deficit of US$55bn expected); MPC meeting (25 bps cut expected), US weekly crude inventory report (+460,000 bbl) expected on Wednesday; ECB monthly report on Thursday; China trade data on Friday.