Daily Strategy: CNS Eyes Stocks Underperforming Pre-Covid Level for Potential Growth
Capital Nomura eyed stocks that underperformed pre-Covid level due to a potential growth after the reopening.
Major stock markets in Asia traded higher on Thursday after China reported its factory-gate price rose at a fastest pace. Meanwhile, the Fed could begin its gradual tapering by mid-November.
On October 14, 2021, Thailand’s SET Index opened at 1,648.57 points, increased 4.93 points or 0.30%.
As of 10:05 local time in Thailand, Nikkei rose 1.01%, Shanghai Composite slipped 0.07%, Australia ASX200 increased 0.96% and Indonesia IDX Composite gained 1.35%.
This morning, China Consumer Prices Index for September rose 0.7% YoY, slightly below a 0.9% increase forecast by economists. Beijing has set a 2021 CPI growth target of around 3%, compared with around 3.5% last year. The producer price index in September rose by 10.7%, increased from a 9.5% rise in August. The 10.7% rise is the highest reading since the start of the database in 1996.
Meanwhile, The Federal Reserve could begin a gradual tapering process by mid-November, according to minutes from the September meeting, released Wednesday. The officials expressed concerns on the U.S. inflation, saying that it could last longer than what they had anticipated earlier.
Mr. Koraphat Vorachet, Capital Nomura Securities’ strategist, through “Kaohoon Jor Talad Program” on October 14, 2021, stated that the Thai stock market could move in sideways trends after the Fed signalled for a tapering in mid-November, while the long-term debt-ceiling increase must be monitored, giving a support level at 1,630-1,620 points and a resistance level at 1,650-1,655 points.
As for domestic factors, the gradual lockdown easing should be positive to the Thai market and more stimulus measures that could result in speculation on some securities related to the measures. However, the tight valuation and the Covid-19 infection that accelerated could limit an upside for the Thai market.
Mr. Vorachet’s investment theme for the reopening play is focusing on stocks that are still underperforming their pre-Covid level (end 2019) due to positive potential in higher earnings. Meanwhile, stocks that rallied on the positive sentiment of reopening in the past, but still showing limited upside on earnings could face a profit taking.