November was a particularly interesting month in an already interesting year for the local equity market. To recap, in the wake of the initial Covid-19 outbreak, the SET weakened to below 1,000 points in March before bouncing back to its peak at 1,455 in June. The index declined steadily to between 1,200 and 1,300 in the months thereafter, closing out October at 1,194.95.
While the SET jumped 21% to 1,444.53 in late November, driven by good news on vaccines and the conclusion of the US presidential election, it still shed 2% on the last trading day to close the month at 1,408.31, up 18% from the previous month.
In terms of investment flows, the SET has been an underperformer this year, but foreign investors are now buying back stocks with net purchases of 32 billion baht for November. This helped the SET50 surge 22% from October, slightly higher than the broader SET. Indeed, investor sentiment has turned quite positive as we head towards year-end. The SET has now surpassed the 1,455-point peak seen in June and is expected to touch the 1,500 level by year-end.
However, the Covid outbreak is still a major cause for concern. Total cases have now reached 68 million, with more than 1.5 million deaths. New cases are running at more than 500,000 each day, down a bit from more than 600,000 earlier, and daily deaths have decreased to slightly more than 8,000, down from more than 12,000 earlier.
There are more than 15 million cases in the United States alone, with the highest death toll globally at nearly 300,000. Many European countries are also seeing new case counts surpass those seen during the first wave, though death rates are much lower at a few hundred per day versus the few thousand per day during the first wave.
Note that there have been no announcements of full, sweeping lockdowns as of yet, with European authorities choosing instead to lock down specific locations with higher case counts. The total death ratio is now at 2.2% worldwide, while the US has a death ratio of 1.8%.
FOREIGN BUYING KEY
We have been waiting for the SET to hold its ground above the 1,450 level before calling for a Buy on the Thai index. We have also stated that foreign fund flows are necessary to push the SET back to above 1,400. Indeed, foreign net buying of 32 billion baht was the key factor that pushed the SET up 18% to above 1,400 in November.
We believe foreign net buying should continue for December at around 40 billion baht, lending positive sentiment to the SET overall. Foreign funds tend to target big caps, many of which have been laggards but have decent outlooks for next year. Anticipating a sector rotation in December, BAM, BJC, CPN and KKP are our top picks to ride the sentiment uplift through the end of the year.
We still like BAM which manages non-performing loans (NPLs) and non-performing assets (NPAs) bought from others. Although its third-quarter performance was well below market expectations, BAM should start to recover from the fourth quarter as it expects to sell out NPLs and start to sell its NPAs on hand. We expect BAM to grow 35% in 2021 and to be included in the SET50 index.
BJC is a big conglomerate with several businesses including management of modern trade retail stores, manufacturing and distribution of personal-care products, manufacturing in the packaging supply chain, and several others, including exports. Its third-quarter profit jumped 247% quarter-on-quarter as Thailand's domestic lockdown was ended. Recovery should continue into the fourth quarter and next year, backed by the economy gaining steam. For 2021, we project a robust 28% profit growth for BJC.
Another stock riding improved economic sentiment is CPN. Although the global situation remains scary, Thailand has only seen a few new Covid cases per day and no new deaths. At the same time, government stimulus campaigns targeting domestic travel have out wind in the sails of domestic tourism. CPN saw profit growth of 431% quarter-on-quarter in the third quarter, also helped by the end of the domestic lockdown.
The company's cost-reduction plan also warrants monitoring as it should help enhance margins even with the impact of lower rental rates. Overall, we see positive sentiment for recovery. Next year, when tourist arrivals pick up, CPN should see more substantial growth. We expect profit growth at 45% for 2021.
Finally, KKP operates in the commercial banking and capital markets businesses, with a focus on car loans. The bank reported strong profit for the third quarter, growing 14% quarter-on-quarter. It continued to expand loans in the third quarter but managed to lower NPLs 10% quarter-on-quarter. Such performance bodes well for overall operations. We expect KKP's profit to grow 24% year-on-year in 2021 with an attractive yield of 9%.
