SCBS Databook

Tags: monthly, databook
November 2019 In October, the SET underperformed foreign stock markets, ending the month down, with investors worried about weak earnings for most sectors in 3Q19F, pulling the market down below key support at 1,600. In November, we expect the SET to recover and stand on 1,600 but see limited upside at 1,620-1,630 as the market battles downside risks: 1) Tightening valuation: Analysts have revised down 2020 earnings and SET valuation is now at 1,608 with forward PER at 15.0x. 2) Crude down: We expect WTI crude to fall below US$50/bbl, pressured by the global economic slowing. This will hurt oil-related stocks; 3) High VIX: VIX is expected to rose from 12-13 points, propelling a higher volatility. We recommend to downsize and with any buying very selective.

3Q19 earnings season. In 3Q19, bank earnings inched up 2%YoY and 5%QoQ. A breakdown of the results increased concerns about continued deterioration in asset quality and loan growth. NIM was mixed. Non interest income rose mainly from one-time gain while fee income stabilized. In real sectors, 3Q19F seems dim as well. We expect petrochemicals and refineries to report weak earnings from lower petrochemical prices and spreads from a demand slowdown, oversupply and inventory loss. Refineries have been damaged by a lower GRM. COMM’s earnings growth will be slow as floods eroded same-store sales.

Some externals easing. 1) The EU okayed the UK request for ‘flextension’ until Jan 31, 2020, meaning it can leave any time until then. Once the UK leaves the EU, there will be a transition period until the end of 2020, which could be extended until the end of 2022. 2) The FOMC cut its Fed Funds Rate by 25 bps to 1.5%-1.75%, as expected and hinted at a pause. 3) US-China trade war. The cancellation of the APEC summit put a hitch in plans to sign phase 1 of a deal. Trump tweeted that China and the US are working on a new site for signing. The USTR is studying whether to extend the suspension of tariffs on US$34bn of Chinese goods since China is buying US$40-50bn in US agricultural products.

Foreign investors were net sellers of Bt7.8bn in the SET, the third month. They increased their holdings in ICT and PROP but downsized BANK and PETRO.  MSCI Thailand ETF in Sep and 3M and 12 periods generated return below MSCI APAC ex Japan but was better in 6M. Bloomberg consensus downgraded yearend target by 2.7% and downgraded Taiwan and China (-0.4%) also.

This month:  Domestic 1) Nov 6 - BoT’s MPC meeting on Nov 6; 2) Nov 18 - NESDB reports 3Q19 GDP. Foreign 1) Nov 7 - BOE meeting and announcement of November 2019 semi-annual MSCI index review (effective on 27).

October 2019 In September, the SET slid -1.07%MoM after rising to 1,680 early in the month, encouraged by better relations between China and the US. Then, concerns of a global economic slowdown pushed the market back down to 1,620, led by a net sell by institutional investors, but it came back up somewhat before month’s end. Oct has key events: US-China trade talks on Oct 10-11 and Brexit - scheduled for Oct 31. We expect the SET to swing around 1,600-1670 and see 1,600 as a buy level. We believe downside is limited at 1,600 with reasonable valuation. At 2019F EPS, forward PE slips below 15.0x to 14.5x. 3Q19 earnings season will begin this month and are expected to be dull but improve in 4Q19. We see market valuation tighter at 1,670-1,700: our strategy is to buy at 1,600 and take profit at 1,700.

Slow 3Q19F earnings growth. Commerce will be pressured by a flood-led SSS contraction. Property developers will be pulled down by weak demand. Energy was hit by a drop in crude oil price. Global economic slowdown has cut demand for petrochemicals. Bank earnings should be stable with stable loan growth. ICT earnings are expected to be better from a wider gross margin; Healthcare earnings are expected to be better as 3Q is its high season.

Externals easing. Several foreign events are unwinding. The US and China will talk again in Washington on Oct 10-11. China is keeping its promise to buy more US agricultural products such as soybeans and pork. If the talks go well, the US will postpone the 30% tariffs on US$250bn in Chinese goods from Oct 15. Chance of a no-deal Brexit is lower; the UK parliament reconvened after PM Boris Johnson’s attempt to suspend Parliament was defeated. Lawmakers will have to ask for a further Brexit delay by Oct 19. The Fed’s decision on policy rate at its Oct meeting is uncertain. A slow 2Q19 GDP growth leads us to expect it to cut rate again. ECB continues to signals easing monetary policy, with liquidity supporting risky assets.

Foreign investors were net sellers of Bt11bn in the SET, the second month. They increased their holdings in Energy for the fourth week but downsized ICT and Petrochem. MSCI Thailand ETF in Sep and 3M period generated return below MSCI APAC ex Japan but was better in 6M and 12M periods. Bloomberg consensus downgraded yearend target by 1.77% and downgraded Taiwan (-0.24%), South Korea (-0.69%) and China (-1.35%) also.

This month:  Domestic 1) Economic cabinet meeting on Oct 7 to consider tourism and export stimuli. 2) Cabinet extraordinary meeting on Oct 17-18 to consider FY2020 budget. Foreign 1) China delegation goes to Washington for trade talks on Oct 10-11. 2) Tariffs of 30% will be imposed on US$250bn in Chinese imports on Oct 15. 3) ECB meeting on Oct 24; expect a policy rate cut. 4) FOMC meeting on Oct 29-30. 50:50 probability for policy rate cut or no action. 5) BOJ meeting on Oct 30-31, expecting to keep policy rate steady. 6) Brexit deadline on Oct 31.

September 2019 In August, the SET fell 3.33%MoM, swamped by negatives in the month. Earnings in 2Q19 fell 16%YoY, raising concerns of an economic slowdown, pressured by a steady acceleration in the trade war between the US and China. Foreign funds flowed out of the SET after four months of buying, pulling the SET down to the month’s low of 1,590. We see the index at 1,600 as attractive, with an estimated EPS of Bt112/share giving a P/E of only 14.3x. Supports are 1,590-1600. Valuation will tighten at resistance of 1,680-1700. We expect the SET to swing between support and resistance in September and suggest buy at support and take profit at resistance.

2Q19 net profit fell 18%QoQ and 16%YoY with macro weakness, trade tension, strong THB, slow Thai government formation and one-time employee benefit expenses. Losers: energy, petrochemicals, construction materials, airlines, hotels, marine transportation, automotive, healthcare, electronic parts, and property developers. Winners: IEs, utilities, commerce, and consumer finance.

US-China trade war escalated with tit-for-tat tariffs. China is slapping tariffs of 5-10% on US$75bn in US goods, including agricultural products and crude oil, effective Sep 1 and Dec 15. It will also levy a 25% tariff on US cars and 5% on auto parts and components on Dec 15 after pausing these tariffs in April. Trump retaliated and said the US will raise duties on US$250bn in Chinese goods to 30% from 25% and duties on another US$300bn in products to 15% from 10%. He also told US companies to find alternatives to operating in China.

Foreign investors were net sellers in August after four months of net buy, with a net sell of Bt54bn (US$1.76bn). They bumped up holdings in ICT for eight months but downsized banks and petrochemicals. In regional markets, MSCI Thailand ETF underperformed MSCI APAC ex Japan in August but still outperformed in 3M, 6M and 12M. Bloomberg consensus revised the SET’s EPS down by 3.28%, in line with the region: Taiwan (-0.63%), Indonesia (-1.02%) and South Korea (-2.84%)

This month: 1) Sep 12 - ECB meeting, expect a new round QE measures. 2) Set 17-18 - FOMC meeting, expect the Fed to cut 25 bps policy interest rate to 1.75-2.00%. 3) Sep 18-19 - BOJ meeting and BOE meeting, expect to keep unchanged rate. 4) Sep 20 – FTSE indexes rebalance. 5) Sep 25 - BOT’s MPC meeting, expect to revise down economic growth forecast. 6) Fiscal and monetary committee proposes tourism stimulus and government investment expediting in mid-Sep.

To swing between 1,600-1,700 in Sept. Buy at the lower bound and take profit at the upper. Valuation is attractive at support of 1,590-1600; it tightens at resistance of 1,680-1,700. Sentiment remains pressured by fears of an economic slowdown or a recession as the 10Y-2Y Treasury yield spread remains negative. In Thailand, the yield curve has not inverted yet but the spread has narrowed to an eight-year low – which is generally followed by a rebound. A no-deal Brexit is increasingly likely after the PM’s controversial suspension of parliament. The US and China may talk this month, but tariffs already took effect on Sep 1 and this will erode global economies.

August 2019 In July, the SET closed down 1.06%MoM on expectations of weak 2Q19 earnings, particularly for Bank, Healthcare, Petrochemical and Electronics. Local institutions stayed net sellers for the third month, but the SET was able to stand at 1,700, supported by local politics and hopes for rapid economic stimuli. Key central banks eased monetary policies but the BoT abstained, attracting capital flow into Thailand as a save haven. Foreign investors were net sellers for the fourth month, of Bt20bn. In August, we expect the SET to recover from firm support at 1,690-1,700; we put resistance at 1,730-1,740.

Mid-caps and those with upward revisions outperformed MoM. MEDIA (VGI, PLANB and BEC) and FIN (KTC and THANI) rose materially in July, as did ICT (DTAC), FOOD (CPF, TU) and AGRI (GFPT), for which earnings were revised up. PROP (QH), BANK (BBL, KBANK) and CONMAT (SCC) saw downward revisions, leading prices down and pressuring the market in July. Stocks with market caps of over Bt5bn that showed a solid rise in July were TKN at +29.14% (more orders from China in 2H19), VIBHA at +29.07% (good earnings growth) and ZEN (good same-store sales and earnings growth in 2Q-4Q19).

Foreign investors were net buyers of Bt20bn in the SET in July, their fourth month of a net buy. They raised holdings in ENERG and ICT but decreased in BANK and PETRO. Capital gain for the MSCI Thailand index was lower than MSCI AC Asia-Pacific ex Japan in July but higher in the last 3M, 6M and 12M periods. Bloomberg consensus shows a downward revision of market earnings of 1.35%, in line with regional markets: Taiwan -1.36%, Indonesia -2.94% and South Korea -4.13%

Key events in August: 1) Government policies launched. We recommend BJC, CPALL, ADVANC, AMATA, WHA, ROJNA, SEAFCO, STEC, EA, TASCO, NER and DOD. 2) Aug 7 - BOT MPC meeting. We expect the BOT to keep rate unchanged. 3) Aug 19 - Thai 2Q19 GDP announced and 4) Aug 29 - MSCI quarterly index review to take effect after being announced on Aug 8.

Market to recover in August. Downside is believed limited at 1,690-1,700, which is firm as investors have already partly priced in weak 2Q19 earnings. Bloomberg consensus revised SET earnings down to Bt104/share from Bt105/share. Investors in the SET and global stock markets have downsized their portfolios after an active rise on overly high expectations for rate cuts. President Trump has made more threats against China in hopes of speeding things up, dulling market sentiment further. Worries are rising over a no-deal Brexit. We believe the market will get back on its feet, aided by the launch of government supportive policies and high earnings yield gap. We see SET resistance at 1,730-1,740.

July 2019 June review - In June, the SET rose 6.80%MoM, bolstered by the foreign fund flows. Foreign investors were net buyers of Bt46.7bn in June while local institutional investors were net sellers of Bt5.4bn. The SET rose in tandem with global stock markets after clear signals from the Fed of monetary easing in order to handle economic risks, especially the uncertainty of US-China trade talks. Investors expect the Fed to make at least one cut in policy interest rate this year, either in July or September. Other central banks, including the BOJ and ECB, have joined in the monetary easing. Clarity in local politics as the PPRP-led coalition took over the task of forming a government and Gen Prayut Chan-o-cha was elected as prime minister, have shored up investor and business sector confidence. The PM has confirmed he will send the cabinet lineup for royal endorsement by mid-July.
Foreign funds played the board. In June, foreign investors played the board. The top five NVDR buy stocks were CPALL, AOT, SCC, LH and BDMS while the sells were PTTGC, TOP, GLOW, SCB and KKP, in that order.
July outlook. We expected SET to rise with resistances at 1,750 and 1,780 on internal and external factors: 1) eased trade tension; 2) further rise in oil price; 3) new economic policies; 4) further foreign fund inflows. Firm supports are 1,717 and 1700.
June 2019 May review  - In May, the SET moved down 3.18%MoM, in line with our expected ‘Sell in May’. The market fell sharply in the first half to 1,599.10, then swung in the range of 1,600-1,635 before closing the month at 1620.22. Most listed companies announced 1Q19 earnings in the month and this was the primary market mover. Intensifying US-China tension pressured global risky asset investment and lack of clarity in local politics hampered the SET throughout the month.
Foreign funds sold Energy and Petrochem. In May, foreign investors sold Energy and Petrochem. The top five NVDR sell stocks were PTT, PTTGC, BBL, PTTEP and AOT while the buys were INTUCH, SCC, BDMS, CPALL and SCB, in that order.
June outlook. We expect the SET to rise in June with resistances at 1,645 and 1,670. Market valuation is attractive and we expect the seating of a new government to attract funds into the market. The market is expected to outperform others in the region amidst external uncertainties and pressure. Key downside risk is the US levying 25% tariffs on US$300bn of Chinese goods. If it does this, the SET would fall to support at 1590-1600.

 

May 2019 April review  -  In April, the SET closed up 2.13%MoM. It moved up in the first half of the month to a high of 1,689.79, then fell to close April at 1,673.52. The rise in the market was backed by a 3.80%MoM increase in Energy and Utilities sectors, in both oil-related and power plant stocks. The rise in worldwide energy consumption in April and tightening oil supply pushed up global oil price. The OPEC+ production cut, sanctions on Iran by the US, civil war in Libya and export reduction by Venezuela have tightened oil and gasoline supplies. WTI crude oil price rose to US$63/bbl at the end of April from US$64/bbl early in the month. Bank sector earnings (excluding BAY’s one-off Bt8.6bn investment gain from a sale of 50% in Ngern Tid Lor) fell 7.00%YoY but rose 16.00% QoQ on seasonality. In 1Q19 we saw seasonally slow loan growth, a small reduction in NIM, weaker non-NII (mainly fee income, which is increasingly showing the damage from the waiver on fees on digital transactions), extra operating expense from the reserve for employee retirement benefits and a manageable deterioration in asset quality to sustain LLR coverage.
Foreign funds played the board.  In April, foreign investors played the board. The top five NVDR buy stocks were INTUCH, SCC, CPN, EA and BDMS while the sells were BBL, SCB, PTTGC, TOP and BTS, in that order.
May outlook.   We expect the SET to go down in May on “Sell in May” for several reasons: 1) unclear economic recovery, 2) downside from earnings misses, 3) crude price is approaching ceiling and 4) negative sentiment from politics. We expect consolidation with supports at 1,645 and 1,630. Resistance is at 1,690-1,700.
April 2019 March review - In March, the SET moved sideways in the range of 1,615-1,650, closing down 0.90%MoM. The market was predominantly driven by politics ahead of the Mar 24 election. At the beginning of the month, shocks rippled the market after the Thai Raksa Chart Party nominated Princess Ubolratana as its prime ministerial candidate, which eventually led to the dissolution of that party. Political parties did a lot of campaigning with the usual campaign promises and in the meantime, foreign investors reduced their holdings in the SET, with a net sell of Bt16.4bn in March as they cut b ack on positions ahead of the formation of a new government. In the last week of the month, the SET swung steeply after the Election Commission announced unofficial poll results that showed Pheu Thai Party with the most constituency MPS at 137 while the Palang Pracharath Party had the largest popular vote. At this point, the formation of the new government has yet to take place as the Bhumjaihai and Democrat parties are waiting for the official results before deciding whether to join the government coalition or stay in the opposition. Pheu Thai and six other parties who call themselves "pro-democracy parties" announced the formation of a seven-party coalition with 255 MPs.
Foreign funds played the board. In March, foreign investors played the board. The top five NVDR buy stocks were INTUCH, SCC, PTTEP, BDMS and CPF while the sells were PTTGC, KBANK, TOP, PTT and BBL, in that order.
April outlook. We expect the SET to move in the range of 1,600-1,650 as it awaits developments in several issues: 1) US-China trade deal, 2) Brexit and 3) the setup of a new government. Markets are also scared that the yield curve inversion signposts a recession. We recommend a continued focus on fundamental valuations and looking past these waves. An index level of 1,600 is attractive and we thus recommend investors be patient and gradually accumulate stocks if the SET falls to 1,600
March 2019 February review - The SET index moved sideways in range of 1,635-1,670, closing up 0.7%MoM. The high point of the month took place in the final week, driven by advances in US-China trade talks when both sides signaled a compromise. President Trump decided to extend the tariff truce until he meets Chinese President Xi and signs a final deal in person while China is proposing to buy an additional US$30bn a year of US agricultural products. A dovish tone in the FOMC meeting minutes and avoidance of a no-deal Brexit have propped up the market.
Foreign investors had a change of heart. While the foreign buying spree continued into the first week of February (Bt1.5bn), foreign investors made a U-turn and became net sellers after the unexpected political events related to PM candidacy. They spent the last three weeks net selling a total of Bt4.9bn, bringing total foreign net sales to Bt3.4bn for the month. If we exclude the big lot purchase (worth Bt6.72bn) of RAM-F by Cypress Consolidated Healthcare Pte Ltd., foreign net outflow was Bt10.1bn.
Foreign funds played the board. In February, foreign investors played the board. The top five NVDR buy stocks were SCC, CPALL, AOT, DTAC and PTTEP while the sells were KTB, PTTGC, SPRC, TOP and IVL, in that order.
March outlook. The SET crawled up 0.7% in February, bringing YTD return to +5.7%, nearly half the 11% drop in 2018. Recovery was partly driven by progress in the US-China trade dispute plus a dovish tone from the Fed. We expect March to be another good month as: 1) external sentiment continues to improve and bring more flows to EMs especially big-caps, 2) Thailand's election should boost domestic demand and 3) positive seasonality in March
February 2019 January review - The SET rose in January, given a boost by the recovery of global crude oil price from US$45/bbl to US$52-54/bbl that pushed Energy up and with it, the market. Confidence was strengthened by the Election Committee's setting of the election date on Mar 24 and the market continued to rise through the second half of the month.
Abroad, the US government temporarily reopened until Feb 15 after President Trump agreed under mounting pressure to end a 35-day-old partial shutdown without getting the US$5.7 billion he had demanded from Congress for a border wall. As for Brexit, the UK parliament rejected the EC-approved Brexit plan and called for a no-confidence vote the following day which the Prime Minister survived, giving PM May a chance to submit a revised plan for a second parliament vote on Jan 29. The move to delay the exit was defeated but she won the vote to scrap the backstop. MPs also backed a non-binding amendment to avoid a no-deal exit. On Jan 30, the Fed kept its policy rate unchanged and signaled that it is done raising interest rates for a while and will be flexible in reducing its bond holdings, a switch from its bias toward a tighter monetary policy last month. This strengthened the risk-on mood which pushed up global stock markets and the SET.
The SET closed at 1,641.73, up from 1,563.88 at the end of last year, providing total return of +5.00%. Foreign investors were net buyers of Bt4.63bn and local institutions were net buyers of Bt7.12bn
Foreign funds played the board. In January, foreign investors played the board. The top five NVDR buy stocks were CPALL, CPF, SCC, ADVANC and BDMS while the sells were TOP, IVL, PTT, TRUE and PTTGC, in that order.
February outlook. Last year, despite strong earnings, the SET lost ground as investors feared policies such as a tighter monetary stance and protectionism would spawn a crisis. This year, the market has come back despite weak earnings (so far). Investors realize that there may be no crisis and current valuations are cheap. Policies are being corrected - central banks are more dovish, and the US and China are more willing to talk
January 2019 December review - In the first two days of the month, the SET rose to test resistance at 1680, which it was unable to break through, backed by a US-China trade 'truce' that delayed US import tariff hikes (from 10% to 25%) until March 1, 2019 on China goods worth US$200bn. China began to cut the duties on car imports from the US and pledged to import more soybeans and petroleum products from the US.
However, the SET index fell pretty much in a straight line through the month, reeling from: 1) the arrest of Huawei's CFO, which risked derailing progress in trade talks; 2) the FOMC hiked its rate despite signs of an economic slowdown (nearly causing an inverted yield curve on 10Y-2Y treasuries); 3) an oil price rout with WTI falling below US$45/bbl (before rebounding) hitting the Energy sector; 4) Brexit deal mess.
The SET Index dropped from 1,641.08 in November to 1563.88 at the end of December (-4.8%MoM). This sank SET index annual return to -10.8%. December saw net foreign outflows of Bt0.3bn, a sharp drop from the outflow of Bt14bn in Nov. Local institutions net bought Bt5.7bn.
Foreign funds played the board. In December, foreign investors played the board. The top five NVDR buy stocks were BDMS, SCB, BEM, AOT and CPALL while the sells were LH, PTTEP, KBANK, IRPC and TRUE, in that order.
January outlook. 2018 ended with low asset price bubble risk after the SET forward PE ratio dropped to 13.5X in Dec from 16.5X in Jan. The equity market is ready to rebound on any signs of relief of key concerns: US-China trade, Brexit uncertainties and the Fed's more dovish tone. In Thailand, there are signs that tourism is recovering, loan growth is returning and interest rates on domestic investment are rising. We expect the upcoming election to boost confidence. Seasonally, the SET and some stocks will tend to perform well in Jan.