The Stock Exchange of Thailand (SET) consolidated early this week at around 1,380 points after a recent steep drop, before staging a relief rebound to between 1,400 and 1,410 at midweek.
Investment sentiment started to turn positive following third-quarter results announcements and a revival of measures to promote savings and equity investment, such as the new T-ESG Fund.
External factors are also expected to lend support as slowing United States inflation and economic growth should encourage the US Federal Reserve (Fed) to ease monetary policy.
One key factor that could restore investor confidence is the effort by the prime minister's advisory team to improve market sentiment. We anticipate additional measures such as the preparation of new investment products to replace the Super Savings Fund (SSF) that is set to expire next year. The government is also expected to accelerate fundraising and investment to build megaprojects such as the land bridge.
The market next week is expected to move sideways up in a range between 1,400 and 1,440 points. We anticipate gradual short covering in stocks that have fallen sharply over the past two to three months, which could turn out to be outperformers.
We shifted our target to alpha stocks that experienced steep setbacks and could attract bargain hunters, focusing on those with decent results and solid management guidance about future earnings. Among the positive factors:
- Third-quarter results are now all in. Of the stocks covered by Bualuang Securities, only 22% fell short of expectations, versus 29% in the second quarter. That said, overall performances were less disappointing than the previous quarter.
- Combined net profit of listed firms in the third quarter rose 17% year-on-year and 21% quarter-on-quarter. Excluding extra items, core profit fell 22% year-on-year, but rose 6% quarter-on-quarter. Sectors that delivered better than expected earnings were food (CPF), energy (OR, TOP, GPSC), healthcare (BDMS) and electronics (DELTA). Those with disappointing results were transport (BTS), contractors (CIVIL), building materials (SCC), petrochemicals (IVL), tourism (CENTEL) and industrial estates (WHA).
- Slightly slower than expected US inflation indicates that monetary policy will start to ease. The market generally expects the Fed to pause its interest rate increases as the rate cycle is peaking. Rate cuts are expected to kick in from May 2024, based on current data.
- Listed companies are currently holding analysts' meetings. In addition to the fourth-quarter outlook, we also anticipate executives' views and targets for 2024, as well as opportunity/risk assessments of the overall economy.
- The market has not factored in the government's digital wallet scheme positively, given the concerns about heavy borrowing to fund it. However, a positive surprise is the e-refund programme to grant tax-deductible spending, with a budget of 50 billion baht, higher than the previous iteration. The stimulus efforts will bring commerce stocks, particularly discretionary and building materials, back into focus (CPN, CRC, ILM, GLOBAL).
- The cabinet is expected to finalise soon the T-ESG fund, which will offer tax perks of up to 100,000 baht, implementing it by the end of this year. Do not dismiss the 100,000-baht break as marginal, because we expect more measures to promote investment before the SSF expires.
- Among the negative factors has been the recent drama concerning "naked short sales" -- short-selling associated with shares that investors do not already possess -- as market players await news on whether regulators plan new rules, or will opt instead for confidence-building measures before they lose faith.
- Recent cases of debt default, particularly on debentures, have raised financial risks for companies looking to roll over maturing debentures. In addition to higher rates, investors may remain cautious and not subscribe to new issues. Worse yet, the matter may adversely affect liquidity management for many companies.
- Geopolitical risk, in particular in the Middle East and Ukraine, may appear to have eased, but incidents still occur and violence may erupt periodically.
- The global economy is still exposed to slowdown or recession risks, particularly in Europe, based on intensifying signs of deflation.
- A slow domestic recovery given insufficient stimulus measures remains a concern. Investors are taking a cautious stance on the digital wallet as it could enhance fiscal risk, raise public debt jitters and adversely affect the country's credit rating.
