Yuanta bullish on tourism, transport
Stock sectors related to reopening such as tourism, transport and restaurants are expected to rally following the announcement of the country rolling out the welcome mat to 10 low-risk countries on Nov 1, says Yuanta Securities.
The brokerage said the reopening will allow stocks in the group to recover and become more attractive.
The reopening should also generate more income, narrow the current account deficit and increase the odds of high GDP growth in 2022.
Yuanta said foreign funds should start to flow into the Thai stock market again after the selloff of more than 300 billion baht since March 2020.
One effect from this move may be a quick appreciation of the baht.
After the reopening, stocks that once benefited from the pandemic, such as packaging, electronic components, agricultural and medical products, will drop in price, with investors pivoting to tourism, transport and eateries, said the brokerage.
Top picks from the group include low-priced and laggard stocks with high potential for upside, such as Airports of Thailand, Bangkok Expressway and Metro, Bangkok Bank, Berli Jucker, Bangkok Dusit Medical Services, Kasikornbank, MK Restaurant Group, Origin Property, and WHA Corporation.
"For investors who can afford to take higher risks, we recommend BG Container Glass, Haad Thip, Prima Marine, and Veranda Resort. Although these stocks have poor net profits in the third quarter, they are expected to recover in the fourth quarter," said Yuanta.
Capital Nomura Securities expects the sectors that will benefit from the reopening to be tourism, airlines, restaurants, retail, industrial estates and hospitals, with Central Plaza Hotel (CENTEL), the Erawan Group, AOT, After You, Central Retail Corporation, CP ALL and WHA singled out for rebounds.
The broker expects CENTEL and ERW to be major beneficiaries as both companies have foreign guests as core sources of revenue for their hotels, which should be in demand after the reopening. They will also gain from the government's tourism stimulus package "We Travel Together", said Capital Nomura.
CENTEL will also receive more income from its restaurant business as more people start dining out after the lockdown measures are eased, said the brokerage.
The prime minister announced on Monday Thailand will allow fully vaccinated arrivals from 10 low-risk countries to enter the country without quarantine from Nov 1.
Visitors are required to take a Covid test upon arrival, and if the result is negative, they can travel freely across the country without quarantine.
He said the country may reopen to tourists from other countries in future months.
"We expect Thailand will attract more foreign tourists during the high season, from the fourth quarter this year to the first quarter next year," Yuanta stated.
After the reopening, outdoor activities such as trade fairs and entertainment events will also be allowed to help increase liquidity in the Thai economy, said the brokerage.
Yuanta said the country's reopening should cause the baht to appreciate. After the announcement, the baht immediately appreciated by 0.8% to 33.60 baht per dollar.
Foreign investors are also expected to return to Thai stocks after recording net sales for two years.
The reopening should also reduce the current account deficit and possibly cause a surplus in the first quarter next year, said the brokerage.
Thailand's current account deficit stood at 137 billion baht after the second quarter this year, but is expected to gradually recover to a balance of 200 billion baht per quarter after the reopening.
If the reopening is successful, economists may upgrade their Thai GDP growth forecasts for 2022, which currently average 3.67%, said Yuanta.
Moreover, bond yields are expected to rise from an increase of liquidity in the system, driven by the recovery of tourism.