The third wave of Covid-19 in Thailand has proven to be more severe than previously expected. Since April, there have been over 2,000 new cases per day, fuelled by a spate of clusters at markets and construction sites. While the prison system clusters now appear to be contained, total infections among inmates have surpassed 22,000.
Bangkok remains the leader in total infections with almost 1,000 new cases per day. The third wave has produced a total of nearly 161,000 infections and 1,308 total deaths, averaging 30-40 per day over the past month.
But there is reason to be hopeful: the country kicked off a nationwide vaccination push on June 7, with some 400,000 doses per day administered since then. This rate is important as it should be sufficient to get 70% of the population vaccinated by year-end.
That 70% level is conducive to herd immunity and supports economic recovery and reopening of the country for foreign tourism, starting with selected provinces this year and a full reopening in early 2022.
Globally, total coronavirus cases have now surpassed 175 million with deaths reaching 3.9 million. But the situation has improved immensely in recent weeks, with new cases dropping significantly in early June to around 300,000 per day from almost 900,000 daily in early May.
We believe the large-scale global rollout of vaccines, with more than 2 billion doses currently administered, has been key to bringing the infection rate down. It's important to remember that while economic recovery in major developed countries is kicking into gear, Thailand's vaccine rollout has been relatively slow and thus recovery will take more time.
RECOVERY ON HOLD
With the third wave still very much present in Thailand, concern has grown about potential impact on gross domestic product in 2021. Previously, we expected the recovery to begin in the second half of this year. That forecast was then adjusted to early in the fourth quarter. Now we are looking at early 2022 at the soonest.
Although the vaccination campaign has lifted hopes, the persistently high rate of Covid infections has thrown cold water on growth forecasts. Indeed, we have revised down our GDP growth forecast for this year to 2.0% from 2.7% previously. That said, the government is staying active on the support front, offering cash handouts to low-income groups and loans to small and medium enterprises (SMEs), and encouraging banks to offer payment suspensions or delays to affected borrowers.
Turning to equities, world markets continue to rise with the Dow Jones and S&P 500 once again marking new highs. Though there has been some cooling off recently, the average is still better compared to May. Here in Thailand, the SET has also displayed a robust performance, rising beyond 1,600 points in early June and holding that level since. We believe investors are now looking forward to the recovery phase and are seeking stocks with solid fundamentals, especially after first-quarter results were announced.
We have seen selective investment in several sectors, with the greatest interest going to post-Covid recovery plays. Average daily turnover remains above 100 billion baht per day, and we are also encouraged by foreign investors turning net buyers in June at 5.8 billion baht thus far. That may seem small but we point out that foreign investors were net sellers of over 65 billion baht worth of Thai shares in the first five months of the year.
With vaccinations accelerating, raising public and market confidence, we believe the SET will trade in the range of 1,590 and 1,640 points for the time being. Our picks this time around -- Singha Estate (S), CP All (CPALL), Central Pattana (CPN) and Sri Trang Gloves (STGT) -- are either suited to the post-Covid recovery theme or are poised to show strong profits in the second half.
The mass-transit player S has seen its businesses severely affected by the second and third coronavirus waves. Skytrain ridership dropped by more than 30% in early January and the situation did not improve until May. Advertising from VGI, its media arm, was also greatly impacted by the pullback in consumption and poor economic conditions.
However, as mentioned earlier, the situation is looking more upbeat as vaccinations continue. Higher vaccination rates should allow people to get back to work and businesses to resume normal operations, rejuvenating travel and domestic consumption.
This theme flows into our next pick, CPALL. The stay-home and work-from-home trends during the pandemic hit traffic at the company's 7-Eleven stores, as seen in the same-store sales decline of 17% year-on-year in the first quarter. This, combined with the weaker performance of the recently acquired Tesco Lotus, resulted in CPALL's quarterly profit falling more than 50% year-on-year.
But on the flipside, CPALL will be a prime beneficiary of the anticipated economic comeback. Though there aren't any complete lockdowns in cities in Thailand at the moment, fear of Covid is still curbing shopping activity and keeping many people at home. In this environment, shopping malls and offices are heavily affected.
EYE ON MALL SPACE
CPN, however, has opened unused space at its shopping malls to be used as vaccination sites; this has helped improve its utilisation rate to 40-50%, almost double the rate seen during in the lockdown last year. Moreover, the company has confirmed it is on track to open two new malls in the second half. Hence, its overall prospects remain strong.
Finally, we still like STGT as a beneficiary of Covid-spurred demand. The maker of rubber gloves for medical and other industrial uses reported a new high in quarterly profit at over 1 billion baht in the first quarter. We expect it to continue enjoying high demand with higher margins, even as mass vaccinations are now being rolled out.
We also believe the establishment of a new normal post-Covid will keep rubber gloves in high demand. For 2021, the market expects net profit to jump almost 250% year-on-year with a huge dividend yield of more than 10%.
