America blinks first in bid to avert trade war with China Thanawat Patchimkul

Head of research

DBS Vickers Securities (Thailand)

While most countries rushed to the United States to seek exemption from its steel tariffs, China retaliated against the US measures and refrained from making any further action apart from offering to negotiate and relax some of its trade regulations, which are already laid out in China’s economic plan.

Now, the US has to send a high-level team to China for trade negotiations. Treasury Secretary Steven Mnuchin was accompanied by Larry Kudlow, the National Economic Council Director; Robert Lighthizer, the US Trade Representative; and Peter Navarro, the White House Office of Trade and Manufacturing Policy Director. Since both countries are trying to avoid an all-out trade war, the outcome should be favourable but could have negative implications on other countries if China agrees to buy more US products and less from elsewhere.

However, the US banning the sales of chips and components to China’s major phone maker, ZTE Corp, prompted China to develop its own semiconductor market. Huawei is also under US investigation for its alleged violation of US sanctions against Iran. Previously, Chinese Tsinghua Unigroup was blocked by the US government in buying Micron Technology, a leading semiconductors and memory chip player.

TISCO SECURITIES

After heavy selling in late March/early April, the market has shown strong signs of resilience, particularly for big and mid-cap stocks. We believe that the SET’s plunge to a three-month low of 1,725 on April 4 probably marked the trough for 2018. We expect the index to gradually rise towards 1,900 points in the third quarter. Our year-end SET index target remains 1850).

We note that local institutions have been the main buyers of Thai equities MTD (+Bt11.22 billion) while foreigners continued their selling spree (Bt16.63 billion MTD).

With tourism numbers in March looking robust despite a high base effect, private consumption slowly picking up, crude oil prices finally moving and several major big cap catalysts starting to play out, the SET continues to track our 2018 roadmap.

We have removed CENTEL from our top picks list as the stock has outperformed its peers and the SET index in recent weeks. Our top picks now consist of PTTEP, TRUE, CPALL, CPF, INTUCH, BBL, SCC, IVL, PTTGC, IVL, BDMS, PSH, LH and QH.

Research Department

Trinity Securities

The latest key factor is 10-year US Bond yield’s new high at above 3 per cent, the highest since 2011.  This has prompted the Thai stock market’s earning yield gap to its low since 2007, indicating much lower attractiveness of Thai stocks compared to US bonds.

Thai listed companies’ performances have not supported the SET Index.

The SET’s latest estimated EPS is revised down for both 2018 and 2019, making Thai stock valuations more expensive.

One more factor which could pressure the SET Index is possibility for global crude price to make short-term corrections due to less geopolitical risk..

One more factor that could limit upsides of the energy group and SET Index is PTT’s sideways move after a split reduced its par.