Krungsri Securities (KSS) has made an analysis for the trading session on November 14, 2019, pointing out some of the must-know events in the equity market as follows:
The SET Index tumbled 11 points (-0.7%) to close at 1,615 in Bt52b turnover, in line with trends in regional markets. The SET was pressured by uncertainty over trade talks after Trump refused to roll back tariffs and said he might impose tariffs on EU auto imports. There was selling in CONS, MEDIA and ETRON sectors. Foreign investors were net buyers of Thai shares at Bt558m but sold net Bt161m worth of Thai bonds and net short TFEX at 5,535 contracts.
KSS is neutral on the market today, expecting the SET Index to hover at 1,610 – 1,620 in the absence of new support. Although the Fed chairman sees the US economy expanding moderately and a strong labor market, the Fed is likely to keep interest rates unchanged. That decision may also be supported by risks of additional tariffs following recent trade war news. These will hurt investor confidence and the market. However, foreign net buy positions in the past three days might offer some support.
Investment Strategy: Selective Buy
1) MSCI rebalancing effective Nov 26: Global Standard will add BGRIM, GPSC, OSP and SAWAD; Small Cap will add CENTEL, DOHOME, JMT, SPRC, STPI, TPIPP and TQM.
2) Defensive stocks: AOT, INTUCH, ADVANC, BEM, BTS, BDMS, BCH, CHG, GPSC, TTW, CPALL
ADVANC (BUY/ TP Bt260 vs Bt233 close) – domestic operations shielded from the trade war. We are optimistic of the upcoming 5G auction as a lower reserve prices and better payment terms will have limited impact on cash flow and dividend payout. ADVANC is our sector top pick.
JMT (BUY/IAA Consensus TP Bt24 Vs Bt20.9 close) – 3Q19 net profit jumped 28% qoq and 37% yoy to a new high of Bt190m. Expect earnings to hit new high again in 4Q19 supported by rising income along with an expanding portfolio. Current portfolio size is Bt140b, sufficient to support cash flow over the next 12 years.
(+/-) Fed likely to keep rate at 1.75%, believes economy will recover gradually: In his statement to Congress, Jerome Powell indicated the Fed will keep interest rates unchanged because the economy remains solid and should recover gradually. The Fed ignored Trump’s request to trim rates to boost the economy and exports. Since this statement is in-line with the previous, there should be neutral impact on the market. CME Group expects the Fed to keep rate at 1.75% until early next year.
(+) OPEC Secretary General expects a trade deal soon, driving up oil prices: WTI price rose by US$0.32 (+0.6%) to US$57.12/bbl after OPEC Secretary General Mohammad Barkindo said he expected the US and China to reach a trade deal soon. This would support a recovery in the global economy and oil prices in the medium-to-long term. However, oil prices moved narrowly following speculation US crude oil inventory had risen by 1m barrels.
(-) Aggregate 3Q19 net profit (70% of listed firms) was Bt200b, down 6.5% qoq and 17% yoy, dragged by Petrochem and Refinery counters: 576 firms listed on the SET have reported 3Q19 results (73% of total firms or 83% of total market cap). Aggregate net profit for 3Q19 was Bt205b ( -6.5% qoq and -17.1% yoy,) and Bt653b for 9M19 (-12.7% yoy). Earnings growth was pressured by Petrochem and Refinery counters which booked huge stock and inventory losses in 3Q19. Other sectors that reported softer growth were Property, Construction Material, Media and Electronics. We expect the market to revise down earnings forecasts soon but that would have limited impact on the SET Index.