SCBS: Next-quarter stock surge likely

SCBS: Next-quarter stock surge likely

Listed companies are expected to reverse course and post higher earnings in the first quarter of next year, aided by the government's economic stimulus measures and improving exports, domestic consumption and private investment, says SCB Securities (SCBS).

Optimism over trade negotiations between the world's two biggest economies and a concerted monetary policy easing by central banks across the world paint a brighter outlook in 2020 for equity investment, said Sukit Udomsirikul, managing director of SCBS.

Softer earnings for listed firms are still expected this quarter, dented by global trade tensions and the economic slowdown, he said. Thailand's economy is expected to expand at a slow pace.

Mr Sukit said the still-inverted US bond yield curve suggests the market remains pessimistic that the US economy will improve next year before entering a downturn in 2021 and a recession in the following year.

The US Federal Reserve is expected to be able to cope with the gloomy economy more rapidly than in the past, he said.

SCBS predicts the Fed to make five more rate cuts before the end of 2020.

Positive trade talks and a series of Fed rate cuts would help the world's biggest economy escape slipping into a recession, Mr Sukit said, adding that there is a 55% possibility that the central bank's monetary policy easing will help the US avoid recession and improve investment sentiment.

Mr Sukit expects investors to adjust their portfolios in November. For the final three months, he recommends shunning dividend plays, real estate investment trusts and infrastructure funds because of unattractive valuations after recent sharp gains, and switching to big-cap stocks, high-liquidity stocks and domestic plays with growth momentum and a continuous growth story.

The brokerage firm's top picks are WHA Corporation, Bangkok Chain Hospital (BCH), Siam Global House (GLOBAL), CP ALL and BTS Group Holdings, as these stocks are expected to outperform in the fourth quarter.

Mr Sukit forecasts the SET index to reach 1,700 points this year, climbing to 1,800 in 2020, while listed companies' earnings growth is seen at 4-5% in 2019 and 5-10% in 2020.

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