SET Index Lacks Positive Factors even after Dropping 5% in 5 Days, Says The Analyst

KGI Securities stated that on Tuesday, the SET Index could remain sideways down, weighed by i) global uncertainties regarding the US stimulus talks and COVID-19 infections and ii) local political intensity. On the external side, US stocks declined overnight as the White House and Democrats still cannot reach any agreement on the economic stimulus. Despite US index Futures ticking up this morning as Pelosi-Mnuchin talks are set to continue today, uncertainties on the timing of stimulus approval remain high.

Locally, anti-government protesters continued yesterday evening, raising investors’ concerns that their activities would hamper the Thai economy, which is already fragile due to COVID-19.

Regarding Thai market valuations, yesterday’s pullback resulted in SET Index trading at 16.9x 12-month forward PE, equivalent to 4.5% earnings yield gap. Hence, the pace of correction should slow going forward but the market needs more clarity on how this political crisis would end before a meaningful recovery can take place.


Asia Wealth Securities (AWS) expected the SET Index today (20 Oct) to have no positive factors to support the recovery even during the past 5 business days, the SET Index dropped 64.68 points (-5.08%) due to negative domestic and international factors, especially the situation of the ongoing domestic gathering.

The government declared a serious emergency in Bangkok, effective on 15 Oct, while foreign factors despite the positive signs of Brexit, uncertainty remains from the new round of stimulus measures in the U.S. and the global situation of COVID-19, especially in Europe that intensifies which depresses the economic recovery while China reported 3Q20 GDP growth in the second quarter, it is still lower than expected.

For investment strategy, AWS still recommended reducing investment portfolio to reduce the risk of stock market volatility. AWS recommended investing only in stocks with positive factors, including expected 3Q20 earnings growth stocks, including BEM, TU, CPF, HANA, KCE, ICHI, WICE and SAPPE, and stocks that benefit from government stimulus measures based on AWS’ investment theme.

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