Recovery foreseen after sluggish April
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Recovery foreseen after sluggish April

Investors monitor an electronic display of stock indices. (File photo)
Investors monitor an electronic display of stock indices. (File photo)

The Stock Exchange of Thailand struggled with another period of weakness in April. The index started the month at 1,609.17 points and declined steadily thereafter, hitting its low on the last trading day of the month at 1,524.30 and closing at 1,529.12, a drop of 80.05 points or 5% in just one month.

Foreign investors were net sellers for April at 7.9 billion baht, while local institutions were net buyers of 822 million, and retail investors were net buyers of 7.6 billion baht. A key factor behind the fall was the big price drop of DELTA during the month, which in turn soured sentiment throughout April.

Also contributing to the decline was uncertainty about the direction of US Federal Reserve policy, particularly the scope for increased hawkishness on interest rates, and an upswing in US bond yields. Meanwhile, First Republic Bank in the US was on the brink of bankruptcy but has now been taken over by JPMorgan.

Average daily turnover on the SET in April was just 44.6 billion baht, down 23.8% from the previous month. This was due in large part to many holidays and long weekends which kept investors away from the market.

Meanwhile, Thai economic figures came out weaker than market expectations. Although data showed a trade surplus of $4.3 billion in March, up from $1.3 billion in February, this mainly reflected the 5.8% year-on-year decline in imports outweighing the export decline of 5.7%.

A key factor was the decline in the Manufacturing Production Index (MPI) of 4.6% year-on-year and declines in imported goods for export in the textile and electronics sectors.

Tourist arrivals rose to 2.2 million in March, up 8.7% from February, while Chinese tourist numbers were still relatively low at 270,000, but up from 130,000 in February. The tourism segment looks to be the only growth pillar for the Thai economy at the moment.


Inflation came in at 2.8% for March, lower than the Bank of Thailand's 3% target. With this in mind, we foresee the central bank increasing its policy rate by 25 basis points at the next Monetary Policy Committee meeting on May 31. This should be the final rate hike, bringing the terminal rate to 2%. Given the weak economic figures, there is also scope for the central bank to lower its GDP growth forecast for 2023 from 3.6% currently.

As US inflation is now just under 5% and the banking sector crisis should be easing, we expect the Fed to soon rein in its rate-hike regime. That said, rates should stay elevated for some time and rate cuts are more likely in 2024 than this year.

For SET-listed firms, almost all first-quarter results are now in. According to a Bloomberg consensus, first-quarter net profit for listed Thai companies should increase 12% year-on-year and 36% quarter-on-quarter. Bank earnings reported in April were up 14% year-on-year and 47% quarter-on-quarter, beating market expectations by 8 percentage points. We also project good results from the energy, petrochemical and transport sectors. A broadly positive results season could help improve market sentiment.

We are also closely watching Sunday's general election. According to historical data, rallies are usually seen in the one or two weeks after an election (the average gain is 3%). This could further bolster market performance for the month.

Our strategy for May is to pick stocks with solid fundamentals and bright prospects for earnings results. Our picks include ADVANC, BDMS, BEM and CPALL.

In the telco sector, we believe ADVANC's earnings bottomed out in 2022 and we project growth of more than 10% from 2024 onward. First-quarter net profit of 6.75 billion baht was an increase of 14% from the first quarter of last year. The company expects to continue paying a tidy dividend with an average yield of more than 4% per year. In addition to its stronger financial position compared to its main rival TRUE, the projected debt/Ebitda of ADVANC is just 1.46 times for 2023 and 1.19 times for 2024, well under the industry average of 2-3 times. All considered, the stock is a nice defensive play with an attractive dividend yield worthy of including in a portfolio.


BDMS continues to be our top pick for the hospital sector. We expect its profit to sustain a moderate growth rate of 6-8% per year, even with the ending of Covid-19 revenue. We also like BDMS as one of the key beneficiaries of improvement in the tourism sector. Foreign patients, especially from the Middle East, China, Cambodia, Myanmar, Laos and Vietnam are a strong growth segment for the hospital group. Although occupancy is declining, foreign patients will help increase average revenue per person. BDMS is also expanding in the social security patient segment, which is currently only 3% of its revenue. First-quarter net profit came in at 3.47 billion baht, close to our forecast of 3.5 billion and stable year-on-year but up 11% from the previous quarter.

In the transport sector, BEM is on a solid recovery track. Its MRT ridership in March rose to between 480,000 and 500,000 trips per day from a longer-term average of 380,000. For the expressway arm, the number of cars totalled 1.12 million per day, around 95% of the pre Covid-19 level.

We believe its earnings will recover strongly in 2023 with full-year growth of 48.8% year-on-year, followed by more stable growth in 2024-25 at 4-6%. First-quarter profit came in at 749 million baht, up 120% from a year ago and above our forecast of 632 million. The increase reflects greater ridership and expressway usage, and these stand to grow further.

The commerce giant CPALL is another major beneficiary of expansion in the tourism sector. With an increasing number of tourists, we believe same-store sales growth as well as average ticket size for its convenience stores will improve. Another huge benefit coming for CPALL is lower electricity bills. Electricity charges for businesses will decline from 5.33 baht a unit earlier this year to 4.70 a unit from May-August 2023. This will help to lower operating costs.

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