The SET moved in a narrow channel last month, bouncing between 1,600 and 1,650 points. Market volatility picked up noticeably as the index marked a new peak in mid-October, supported by rise in crude oil prices and speculation about strong bank earnings.
Later in the month, however, we saw a sell-down on profit taking and worries about the severe debt problems at Evergrande, China's largest property developer. Expectations that the US Federal Reserve was getting ready to pare back its stimulus also pushed investors into wait-and-see mode in late October.
Trading volume in October declined significantly, to around 81 billion baht a day compared to 94 billion in September and 90 billion baht for the year to date. We also saw the lowest daily turnover of the year, at 65 billion baht, in late October.
On the positive side, daily new Covid-19 cases have been below 10,000 so far in November. While lockdowns have been gradually lifted since October, new cases have not increased and in fact have continued to decline. Moreover, Thailand has now reopened to vaccinated tourists from more than 60 countries. Covid case numbers remain in check, and this bodes well for full opening later in the year to tourists for the festive season and an acceleration of the economic recovery.
NARROW RANGE
We expect the SET to continue moving in a narrow trading range between 1,610 and 1,650 for the rest of the year. At the moment, we are nearing the end of the third-quarter results season. Market expectations have been generally downbeat as the third quarter saw widespread Covid lockdowns with daily new infections peaking in July at more than 20,000, with more than 300 deaths per day. That said, banks' third-quarter earnings were actually better than expected. This should be considered a good sign for the market in November.
Regardless, with the easing of lockdowns and reopening to tourists, investors now see scope for a much better fourth quarter. Another big factor is the start of tapering by the Fed in November, slightly earlier than expected. The Fed is now in a position where it could increase its policy interest rate twice next year; analysts previously had expected only one hike. Also on the macro front, crude oil prices remain above US$80 per barrel, but we expect a decline to the mid-70s later in the year.
Our stock picks for this month -- BDMS, JWD, SPALI, TIDLOR and TTB -- are largely plays on Thailand's economic recovery and reopening. BDMS, our top pick for the hospital sector, just announced third-quarter results that beat market expectations. The country's reopening should benefit BDMS by increasing its overall bed occupancy. BDMS is also focusing on increasing revenue from telemedicine. This service requires limited capital expenditure and could significantly enhance profit down the road. For 2022, we see strong net profit growth of 21% from BDMS.
We also continue to like the logistics player JWD. Its earnings should remain strong, supported by revenue from its investments in several countries, including Vietnam, Cambodia and Taiwan. We maintain a profit growth forecast of 50% for this year and another 46% for 2022F, underpinned by new investments and growth in the logistics industry.
PROPERTY OPTIMISM
In the property sector, SPALI is one of our top picks. The developer announced a much better third quarter result than market expectations thanks to higher transfers and fatter margins. Note also that the central bank has just eased regulations to allow 100% loan-to-value for second-homes priced under 10 million baht, effective until the end of 2022, to stimulate the market. This should relieve some pressure in the property sector and lend a hand to demand next year. We also note that SPALI has robust inventory on hand, valued at 77 billion baht and ready to sell. This means the developer should be a beneficiary of the regulatory changes.
Thailand's finance sector has been gathering interest again recently. TIDLOR stands to directly benefit from higher demand for truck and motorcycle loans in the fourth quarter. Economic recovery will also enhance the financier's performance as we near the end of the year. Another factor is market expectations that TIDLOR will be included in the MSCI in November and SET50 in 2022. This means major funds investing in index stocks will have to include TIDLOR in their portfolios.
Finally, we turn to the banking sector. As results for the third quarter have impressed, the sector has become interesting again. Given that big bank share prices have already risen significantly, we are looking more at smaller banks, such as TTB, which also beat market expectations. Although quarterly revenue declined, its asset quality remained sound. We expect the banking sector recovery to track the anticipated economic recovery. Revenue should improve for TTB, costs should decline, and negative impact from its merger should continue to decrease. All considered, we expect TTB's earnings to jump 59% in 2022 and 25% in 2023.
