Stocks advance but high valuations a concern

Stocks advance but high valuations a concern

Recap: Global stock markets enjoyed modest gains yesterday, taking their cue from the advance of Wall Street tech shares, but weak economic data and lofty valuations capped advances in the wake of huge rally that has wiped out earlier pandemic-induced losses.

The SET index moved in a range of 1,292.69 and 1,331.80 points this week before closing yesterday at 1,299.26, down 2.1% from the previous week, in daily turnover averaging 49.5 billion baht.

Retail investors were net buyers of 10 billion baht. Foreigners were net sellers of 5.6 billion baht, institutional investors sold 4 billion and brokerage firms offloaded 444.3 million baht worth of shares.

Newsmakers: New Zealand Prime Minister Jacinda Ardern has postponed the nation's election to Oct 17 from Sept 19 to focus on fighting a coronavirus second wave.

  • Southeast Asia is facing a new coronavirus strain that the Philippines, home to the region's largest outbreak, is studying to see whether the mutation makes it more infectious.
  • The French government warned on Tuesday that mask-wearing would soon be compulsory in all workplaces to keep the coronavirus under control, as countries across the world ramped up localised restrictions on nightlife and socialising.
  • South Korea warned of tighter restrictions as new virus outbreaks appeared, including one linked to a church where more than 670 members of the congregation have been infected but hundreds more are reluctant to get tested.
  • Japan's economy endured a historic contraction of 7.8% in the second quarter, reflecting the impact of the pandemic.
  • Mass testing of Hong Kong residents for coronavirus will begin on Sept 1, Chief Executive Carrie Lam announced yesterday, as she warned people not to be complacent despite a steady fall in the number of new infections.
  • China confirmed plans to talk with US officials soon to review progress on their phase-one trade deal, even as relations deteriorate on other fronts ranging from human rights in Hong Kong to technological dominance. President Donald Trump has stepped up rhetoric against China ahead of what is expected to be a tough re-election fight.
  • Joe Biden formally accepted the presidential nomination of the Democratic Party on Thursday, a night after his former boss, Barack Obama, told a virtual convention that Donald Trump was treating the US presidency like "one more reality show".
  • Apple has become the first US company to reach US$2 trillion in market value in the latest demonstration of how tech giants have benefited from the upheaval caused by the pandemic.
  • Facebook founder Mark Zuckerberg answered questions under oath on multiple days this week as part of a US Federal Trade Commission's inquiry into whether the company broke antitrust laws, the company said on Thursday.
  • The National Economic and Social Development Council (NESDC) downgraded its economic forecast for the whole year to a contraction between 7.3% and 7.8% from an earlier forecast of 5-6%, after reporting that GDP contracted by 12.2%, the most in 22 years, in the second quarter.
  • Domestic car sales shrank for a 14th straight month in July, dropping 24.8% from a year earlier to 59,335 vehicles, the Federation of Thai Industries said.
  • As many as 1.76 million workers risk losing their jobs if factories that used Section 75 of the Labour Protection Act fail to restart operations, warns the NESDC. Section 75 allows factories to suspend operations due to financial hardship, if they pay employees 75% of their regular wages during this period.
  • The Tourism and Sports Ministry aims to introduce its "Safe and Sealed" tourism plan in Phuket by Oct 1, while operators in Chiang Rai and Chiang Mai are teaming up as a northern hub for long-stay travellers.
  • Thailand's cross-border trade fell by 9.18% year-on-year in the first half, attributed to lockdown measures and the slowing economies of neighbouring countries.
  • Business sentiment rose for the second straight month in July, driven by the lifting of lockdown measures. However, concerns persist about a second Covid-19 wave and growing political rallies.
  • Cabinet approval of 214 billion baht in additional borrowing to compensate for a budget deficit is intended as a credit line in case public expenses exceed revenue, says the Public Debt Management Office.
  • The Bank of Thailand is assessing banks' stress tests and capital increase plans for the next two years before considering whether to relax the suspension of dividend payments.
  • Thailand ranks 63rd out of 85 countries in the digital quality of life index based on research by the privacy protection company Surfshark, trailing Singapore, Malaysia and Vietnam in Asean. The research assesses internet quality, affordability, e-security, online government services and e-infrastructure as key elements.
  • Media spending plummeted 20.9% in the first seven months this year because of the pandemic and is expected to fall to a two-decade low of almost 72 billion baht this year, according to Media Intelligence.
  • The hotel and retail sectors should prepare for stringent cost-cutting and find alternative income sources for as long as there is no coronavirus vaccine, as it will take two years for business to resume as usual, says the property consultant JLL Thailand.
  • Transport Minister Saksayam Chidchob is pushing for Airports of Thailand Plc (AoT) to add four more local airports, including Buri Ram and Krabi, to its portfolio by the end of this year. The plan had stalled earlier because of concerns about legal issues related to the transfer of the properties from the Department of Airports.
  • Central Retail Corp Plc (CRC) reported a loss of 2.52 billion baht in the second quarter of 2020 on revenue of 41.4 billion.
  • SET-listed Krungthai Card Plc (KTC) has tightened personal loan approval criteria for certain risky segments and reduced the approval rate for unsecured loan products.
  • Indorama Ventures (IVL) saw core net profit grow to US$82 million in the second quarter, compared with $50 million in the first quarter, driven by strong demand in polyethylene terephthalate plastic and hygiene fibres despite low crude oil prices affecting margins.
  • SET-listed Banpu Power (BPP) saw a slight increase in revenue for the second quarter of 2020, helped by three combined heat and power plants in China.

Coming up: Thailand will announce July trade figures on Monday. Germany will announce final second-quarter GDP data and August business confidence on Tuesday, and the US will release July new home sales the same day.

  • The US will release July durable goods orders on Wednesday and Thailand will release July industrial production figures. The US will release its second estimate of Q2 GDP data on Thursday.
  • Canada and France will announce second-quarter GDP data on Friday. Germany will announce September consumer confidence and the US will release July personal income and spending.

Stocks to watch: Capital Nomura Securities recommends stocks benefiting from recent baht depreciation including TU, CPF, DELTA, KCE, HANA, SMT, SAPPE, XO, EPG and BANPU. Every one-baht depreciation against the dollar will increase their net profit by 3-6%. But the weaker baht could hurt others with foreign currency liabilities, among them PTTEP, AAV, BA, THAI, TOA, TASCO, TVO, AMATA, and WHA.

DBS Vickers Securities Thailand says healthcare stocks -- BCH, BDMS, CHG, RJ and RPH -- are attractive as the high season for the sector approaches. The brokerage also recommends accumulating defensive stocks including ADVANC, DTAC, CPF, CHG and OSP. High-dividend stocks include KKP, TISCO and LH. Among REITs and infrastructure funds that offer dividend returns higher than deposit are DIF, AIMIRT and IMPACT.

Technical view: DBS Vickers sees support at 1,280 points and resistance at 1,326. Capital Nomura sees support at 1,252 and resistance at 1,360.

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