Trade wars to fuel pressure on Thai bourse

Therdsak Thaveeteeratham

Executive vice president – research

Asia Plus Securities

After its all-time high of 1,843 points on January 25 this year, the SET Index has turned due to lack of support. Fundamentally, there are no negative factors, but concerns remain the same regarding the Eastern Economic Corridor, public investment and changes in commodity prices. Foreign investors have continued their net sales and focused more on short-term trading. As a result, the SET Index has moved in a narrow range. Late last week’s issue on US trade protection will likely presฌsure the SET Index to drop from the normal range of 1,800 +/10 points but with limitฌed downside as foreign holdings of Thai shares are now very low. The resistance line of 1,780 points is strong.

The Fed’s view for this year’s three rate hikes reflects the upward trend of interest rates, while in Thailand the BOT is expectฌed to continue its monetary easing and leave the policy rate unchanged at 1.5 per cent for the whole 1H18 due to low inflation. The Thai policy is predicted to rise by 25 basis points in 2H18.

Amidst global trade protection and Thai fiscal stimulus, Thai GDP growth is estimated at 4.2 per cent this year. We prefer domestic plays for its fewer impacts from international trade and gains from domestic economic recovery. We pick BCH (fair value@Bt19.30) and BPP (FV@Bt33.20). Dividend plays are also attractive, while interest rates remain low and previously, their prices fell to low level in opposite with outstanding performance. We prefer QH (FV@Bt4.30).

Prakit Siriwattanaket

Vice president

Kasikorn Securities

The trade dispute between the US and China for infringement of intellectual property, and China’s retaliation, has raised concerns for stocks markets in the region. We believe this dispute will not develop to a trade war. The Thai bourse should not see panic sales. Historically, US stock market fluctuations affected the SET Index only after the Thai exchange opened. There were always rebounds on closing.

The US-China trade dispute is expected to affect Thailand’s midstream products, particularly electronics items exported to China, given these are a part of Chinese products’ supply chains. HANA could affect the situation largely as 33 per cent of its income is from exports of electronics components to mobile phone makers in China. KCE and Delta could see limited impact, given its focus on Europe. Besides, industrial estates will likely suffer impacts if the situation is developed to affect global trade and investors postpone their investment. Domestic players such as retailers, hospitals, power plants and communications firms will see limited impacts. When their prices drop following negative market sentiment, this is an opportunity to accumulate them. This week, the SET Index still sees its expectations on window dressing. In the past five years, the SET Index had an 80 per cent probability to provide an averฌage return of 1.9 per cent in the last five days of the first quarter. Rises in the SET Index have always been in line with purฌchases of local institutional investors late in a quarter. We believe that some of their purchase will be directed to big caps in the SET50 Index, which could prompt popular stocks and large funds to hold to create some window dressing.