The Stock Exchange of Thailand (SET) index could experience a downward correction to 1,700 points because of lower earnings in the banking sector in the third quarter and PTT Exploration and Production Plc's (PTTEP) asset impairment, says Apple Wealth Securities.
The banking sector's net profit was lower in the third quarter year-on-year, while PTTEP had to set aside impaired assets worth 18 billion baht for the Marina Oil Sands project in Canada, affecting its parent company's net profit in the third quarter, said Apichai Raomanachai, deputy managing director at Apple Wealth Securities.
Eleven SET-listed banks' aggregate net profit for the third quarter fell by 8.8% year-on-year, weighed down by larger loan-loss provisions amid an uptick in bad loans.
The banks' combined net profit came to 49.2 billion baht for the three months to September, compared with 54 billion a year earlier, according to statements filed with the SET.
Relatively weak global oil prices have pushed PTTEP to delay its final decision to invest in its wholly-owned Mariana Oil Sands project.
Apple Wealth Securities shaved its earnings per share outlook for the SET this year from 100.5 baht per share to 98.60, which reduces the bourse's upside year-end projection to 1,725 points from 1,758 points.
"This projection includes fund inflows from long-term equity funds and retirement mutual funds of around 40 billion baht," said Mr Apichai, citing a forecast from Morningstar Research Thailand.
He said the SET index in November is expected to have a support level of 1,690 points and a resistance level of 1,750 points.
For long-term equity investment, the outlook remains volatile because of domestic political developments affecting the military-led government's general election road map.
A crucial factor to keep an eye out for this month is the recent Federal Open Market Committee (FOMC) meeting, with analysts expecting the FOMC to raise interest rates by 0.25% in the next meeting scheduled for December, said Mr Apichai.
Investors will also focus on market sentiment following the selection of the US Federal Reserve's new chairman, who is scheduled to take office in early February 2018, he said.
Another factor on investors' radar is the Opec meeting scheduled for Nov 30, with analysts expecting both Opec and non-Opec members to support cutting oil production until year-end 2018, said Mr Apichai.
Apple Wealth Securities recommends investing in banking stocks such as Bangkok Bank (BBL), Kasikornbank (KBANK) and Siam Commercial Bank (SCB) as loan growth is expected to expand by 5-7% next year.
Tourism and retail stocks are also recommended because of benefits from government measures to support consumer spending and the high tourism season, with the stocks Erawan Group Plc (ERW), Minor International Plc (MINT), Asia Aviation Plc (AAV), CP All Plc (CPALL), Robinson Plc (ROBINS), Berli Jucker Plc (BJC), and Thanapiriya Plc (TNP) all suggested by Apple Wealth Securities.