In terms of valuation, the SET Index at 1,680-1,690 points — the zone to prompt the market’s earnings yield gap to return to the long-term average — is the safe zone for buy.

Trinity Securities’ research department said last week that the Thai stock market has seen sharp rises without no new factors, while its valuation has been high. “Strategically, we will adopt a wait-and-see attitude. In terms of valuation, the SET Index at 1,680-1,690 points, the zone to prompt the market’s earnings yield gap to return to the long-term average, is the safe zone for buy. Our assumptions are the US 10-year bond yield at 1.95 per cent and this year’s estimated market earnings per share at Bt105.5,” the department said.

According to Trinity, when the SET Index retreats, the attractive stocks are:

1. Stocks with gains from the government policy to stimulate consumption — CPALL, BJC, ROBINS;

2. Big caps with low valuations and laggard prices — SCB, MINT;

3. Stocks with estimated interim dividend payment and expected outperformance in the third quarter of every year — LH;

4. Stocks with gains from estimated interest rate cuts — TCAP, S11.

Positive alpha with low beta: But if investors want to stay in the safe zone during market volatility, investors may focus on the said stocks with positive Alpha and Beta at lower than 1 time such as ROBINS, LH, TCAP, S11.

This week, the focus will be on the following issues.

1. Fed chairman Jerome Powell’s statement and explanation to the US Congress on July 10-11.

2. Dissemination of the Fed minutes on July 10 and European Central Bank minutes on July 11.

3. Announcement of Thai-listed companies’ earnings results.

Meanwhile, DBS Vickers Securities (Thailand)’s head of research Thanawat Patchimkul said that Japan’s decision to curb exports of high-tech materials to South Korea could have a significant impact on electronics supply chains, not only in Korea, but also the region.

Last week, the Japanese government said that it would curb the exports of high-tech materials to South Korea. Bilateral diplomatic ties have deteriorated over disputes regarding compensation for South Koreans forced to work for Japanese firms during World War II. Effective Thursday, Japan will require its exporters to seek approval when shipping three high-tech materials to South Korea, a process that will take up to 90 days.

The three high-tech materials on Japan’s restriction list are crucial for the manufacture of semiconductors and display screens. Japan currently dominates global supply of these materials. On the other hand, South Korea plays a key role in the global supply of memory chips and OLED screens.

A shortage/delay in component supply could affect the downstream electronics producers around the region. This could make the Thai electronic sector vulnerable.

Key financial institutions have been continuously lowering their GDP forecasts for 2019 as the economy looks to be decelerating faster than anticipated.

The National Economic and Social Development Council, Thailand’s top economic advisory body, has adjusted down its GDP forecast from 4 per cent made in February to 3.3 per cent in May. Kasikornbank (KBank) has also lowered its GDP forecast for 2019 from 4 per cent made back in December last year to 3.7 per cent in February and to 3 per cent last week.

The ongoing US-China trade conflict was unanimously cited as the key factor driving down growth, as Thailand is in the supply chain of goods that are impacted by the tariffs the US has imposed on China.

In May, the US raised tariffs from 0-10 per cent to 25 per cent on US$250 billion worth of goods from China. Many of these goods include electronic devices whose parts are manufactured in Thailand. This has led to a continuous drop in Thailand’s shipments to China, the Kingdom’s largest trading partner, since the beginning of this year.

From January to May, Thai exports to China declined by 8.7 per cent year on year with a value of $11.6 billion, reducing by over a billion dollars from the same period last year, according to the Commerce Ministry. The ministry has since reduced its overall year-on-year export growth target for 2019 from 8 per cent to 3 per cent, compared to last year’s 6.9 per cent growth.

However, the ministry’s 3 per cent target is still being viewed as optimistic by various institutions. Economic research units of various commercial banks have estimated that Thailand’s exports will be below 1 per cent. Krungthai Bank and Bangkok Bank predicted that exports would grow by merely 0.8 and 0.5 per cent respectively. KBank predicted that exports would not grow at all.

Another key factor contributing to the decline in exports is the appreciation of the baht throughout 2019. From December 31 to July 3, the baht appreciated by 5.2 per cent, making it the strongest currency to appreciate against the dollar in the Asia Pacific region, according to Siam Commercial Bank’s Economic Intelligence Centre.

The strengthening baht could wipe out as much as Bt66 million off the value of Thailand’s exports this year and cut companies’ profits by about Bt17 billion, according to a research by TMB Analytics.

The appreciation of Thailand’s currency is largely due to the country’s strong current account surplus, the high level of foreign currency reserves and arrival of foreign direct investments, said Jittipol Puksamatanan, chief market strategist of Krungthai Bank.

Businesses that distribute products locally and import raw materials are expected to benefit the most from the baht’s appreciation, said TMB Analytics. They will gain from an estimated reduction in import material of Bt62 billion, and an increase of 0.3-4.9 per cent in gross profit margin.

The final key factor that will negatively impact Thailand’s export figure is the establishment of the EU-Vietnam free trade agreement (EVFTA). Thailand’s trade with the EU has already declined by 7 per cent in the first five months of this year and will continue to decline further throughout the year due to the fact that Vietnam is a key trade competitor of Thailand, according to Aat Pisanwanich, director of the University of Thai Chamber of Commerce’s Centre for International Trade Studies (CITS)

Research from CITS suggests that after the EVFTA becomes active, Vietnamese exports to the EU would increase from $50 billion to $70 billion annually, reducing Thailand’s exports by $20 billion in the second half of this year and $40 billion in the next two years.

To cope with these economic challenges, the Thai government is urged to stimulate domestic spending through various policies such as welfare card policies. Krungthai Bank’s Global Business and Development Group expects the incoming government to inject up to Bt100 billion into the economy to stimulate growth in the second half of this year.

“To boost spending, the government should implement immediate measures to stimulate the economy by targeting consumer spending directly,” said Nattaporn Triratanasirikul, Kasikorn Research Centre’s assistant managing director.

The incoming government is also urged to continue its investments in mega-infrastructure projects to boost investment sentiment throughout the rest of the year, said Siriporn Suwannagarn, managing director and financial advisory head of KBank’s Private Banking Group.

However, infrastructure investment is expected to face major delays in 2019, as hiccups in major infrastructure projects occur and the incoming government facing budget delay issues. For instance, the Transport Ministry plans to invest Bt200 billion in infrastructure projects throughout this year, however, Krungthai Bank’s assessments suggest that only Bt77 billion will actually be spent on projects mainly located in the Kingdom’s central region.

“Our assessments suggest that the Bt77 billion public investment, which accounts for only 0.1 per cent of Thailand’s GDP, will not be sufficient to offset Thailand’s slow economic growth in the second half of this year,” said Mana Nimitvanich, first vice president of the bank’s Global Business Development and Strategy Group.

Finally, Thailand should move swiftly to establish a trade deal with the EU, which accounts for up to 10 per cent of its exports. Thailand should also seek further trade opportunities by establishing new trade agreements and finishing the Regional Comprehensive Economic Partnership negotiations by the end of the year, according to the Asean Business Advisory Council.

Prinya, a technology and security specialist, said Libra proposed by Facebook and 27 other organisations will have far-reaching impacts around the world so it is necessary for the Thai central bank to commission a detailed study.

Earlier, Facebook had said it would form a consortium of 27 partners to launch Libra as a digital currency to serve an estimated 1.6 billion people worldwide who currently have no access to banking and financial services.

Mastercard, Paypal and Uber are among members of the Libra partnership, which is expanding and raising funds to operate the crypto-currency as a new alternative to fait currencies such as the dollar and baht.

According to Prinya, Libra is different from bitcoin as there will be hard assets such as gold backing the crypto-unit, providing stability to the currency’s value.

He said there was a strong chance that people around the world would turn to digital currencies like Libra since it would be more convenient and cheaper to use digital units, especially among those already on the Facebook social platform.

Facebook, the world’s largest social media platform, currently has more than 2 billion users worldwide, including about 50 million users in Thailand, which is ranked among its top-10 markets.

The Libra digital currency is expected to be operational in about one year, so the BOT is preparing to follow its development closely.

If operational, Libra, due to Facebook’s and its partners’ strengths as well as their global market reach, will likely have significant implications on the role of central banks around the world.

Interest rate and other monetary policies will likely be affected by the rise of crypto-currencies that have advantages over paper and fait currencies as evidenced by the rising popularity of fintech and other startups providing cheaper and faster cross-border money transfer services.

According to Prinya, the proposed Libra has the potential to be the new dollar of the Internet so every government and central bank is supposed to monitor its development closely.

Besides Libra’s huge implications on the global financial and payment system, Prinya said there are also privacy issues regarding the massive personal financial data that will be involved in the use of new digital currencies.

While many consumers around the world will like digital currencies due to their convenience and cheaper costs, policymakers and regulators will see new challenges arising from the use of digital currencies, especially if their value is as stable as traditional money and currencies.

“In olden days, we used traditional taxi cabs, today we have Uber or Grab as a new choice. It’s the same for Libra when compared to traditional currencies. It will be the new currency one way or the other for sure, even though its exact concept and format is still evolving,” said Prinya.

“The Red Line route will operate within 2020,” Arkhom said after a site visit to Japan on Saturday.

Arkhom also met with the management team of Hitachi to see the trains for the Red Line. The Hitachi management team confirmed delivery of the first two trains to Thailand in October this year. The Red Line route from Bang Sue to Rangsit will become operational in 2020.

Operated by the State Railway of Thailand, there will be test runs on the route in early 2020 before it opens for the public in the middle of the year. The trains are expected to carry 300,000 passengers per day.

“Investors have to be active in adjusting their portfolios to optimise their returns by strategically investing in industries that will be positively affected by these four mega-trends,” Andreas Froschki, director of equity research for Europe at Allianz Global Investors, said on Friday at a seminar titled “The Thematic Investing Strategy”.

Different business opportunities arise from the impact of ageing societies in various societies, including in Thailand. The emergence of younger middle-class citizens who are digital natives has also contributed to the technological disruption in markets, such as the increased use of automation and artificial intelligence in the manufacturing sector, Froschki said.

Meanwhile, resource scarcity and the urbanisation of cities had led to issues of insufficient public services and waste management, as well as overcrowding.

One industry which Allianz has identified as part of this mega-trend is the pet industry. The growing middle class, ageing population, more single people in the younger generations, and changes in social perceptions of animals have led to rising demand for pets globally, Froschki said.

From 2010 to 2017, the value of the pet industry in the US increased from US$48 billion to $69 billion, growing at an average rate of 5.2 per cent year on year, according to the American Pet Products Association.

On the other hand, Froschki added, Asia has seen up to 15 per cent growth in the pet industry in the past decade.

“From this investment opportunity, investors should consider investing in businesses that produce commercial pet toys, pet food and the veterinary industry,” he said.

When targeting in a particular theme, he said, investors should invest in at least 30 stocks in the theme to gain the optimal benefits from the rising trends, rather than allowing their returns to be determined by the fluctuation of individual stock prices.

Furthermore, investors should be more active in choosing the timing of their investments, said Neil Dwane, global strategist for Allianz Global Investors.

For example, the annual percentage change in the Japanese stock market is up to 225 per cent year on year.

“But these changes consist mostly of mild rallies and drawdowns, and the Nikkei index has stayed within the same bracket for nearly 30 years,” he said. “More and more stock markets in Asia are becoming like the Nikkei, volatile but only within a certain bracket, creating return opportunities for active investors.”

Foreign fund investors bought a net Bt1.57 billion worth of stock, while individual investors’ net purchases totalled Bt2.59 billion.

The team has been working closely with related state agencies such as the Securities and Exchange Commission (SEC) and also the central banks of other countries, as it views that the launch of Libra will be a global issue.
Siritida said the BOT understood that Facebook’s aim with Libra is to make cross-border transfers easier, but the bank has to consider other aspects surrounding its use, such as security and the stability of the new cryptocurrency and other financial mechanisms associated with it.

The government’s planned infrastructure projects will draw in further foreign investment into the country, which is seen as an attractive and low-risk investment market, Siriporn Suwannagarn, managing director and financial advisory head of Kasikornbank’s Private Banking Group, said at a press conference on Friday.

Foreign and domestic investors would like plans for the next government budget to be released as soon as possible, she said. This way, investors will be able to adjust their investment strategies to optimise returns on sectors that will benefit from new government policies.

“For instance, if the government announces its plans to roll out more Pracharat policies directed to the grassroots economy, then the agricultural sector will stand to benefit. On the other hand, if the government increases its focus on the Eastern Economic Corridor, then there may be further investment opportunities in the manufacturing sector,” she said.

Growing foreign investment flows into the country along with a strong current account surplus have strengthened the baht in recent months, creating a key opportunity for Thais to invest abroad.

However, Siriporn cautioned investors on the high level of stock market volatility around the world as the global economy has entered a late-growth cycle.

“Global markets have been overreacting to the ‘good’ financial news as the US Federal Reserve has signalled lower interest rates and the US and China agreed to resume trade talks at the G20 meeting,” she said.

The Thai stock market has been part of this trend. The Stock Exchange of Thailand (SET) Index at the end of June showed an increase of 6.8 per cent over the previous month, marking it as the best performer in Asia. It is up 10.6 per cent from the end of 2018 to 1,730.34 points.

The average daily trading value on the SET and the Market for Alternative Investment (mai) in June was Bt60.53 billion (US$1.95 billion), up 3.1 per cent from the preceding month.

However, the US policy rate has not been lowered yet and the US tariffs on Chinese goods have not been reduced, Siriporn said.

If these factors worsen, investors should readjust their portfolios and invest less in equities, focusing more on assets such as gold and bonds, she said.

Although the market opening early on Friday saw most electrical energy power plant’s share price drop, prices had fully rebounded at the market close mid-day.

BCPG Plc, for example, had an opening price of Bt18.80 per share, a Bt0.40 drop per share, but the price rebounded to close at Bt19.10 per share on Friday morning for a total drop of Bt0.10 per share from Thursday. Gulf Energy Development Plc or GULF opened at Bt122.50 per share early on Friday morning, down Bt3 per share before rebounding to close at Bt126.00 per share on Friday morning, up Bt0.50 per share,.

RATCH Group Plc opened at Bt64 per share, a drop of Bt0.25 per share but rebounded to close at Bt64.25 per share on Friday’s morning, unchanged from Thursday. Global Power Synergy Plc or GPSC had an open price of Bt69 per share, a Bt0.25 per share drop and then rebounded to close at Bt71.25 per share on Friday’s morning, up Bt2 per share. Energy Absolute Plc or EA opened at Bt53.75 per share, a Bt0.25 per share drop before rebounding to close at Bt54.25 per share on Friday morning, up Bt0.25.

According to Expedia Group, approximately 1 in 3 global hotel room nights are booked via mobile and more than 50 per cent of global traffic on Expedia Group sites is via mobile. Expedia Thailand today released additional results from its annual 2019 Aeroplane and Hotel Etiquette Study, which highlights booking preferences among Asia Pacific travellers.

Conducted on behalf of Expedia by Northstar Research Partners, the 2019 study revealed that travellers are increasingly making their travel planning and bookings on their mobile devices. The top five countries in the Asia Pacific region that disclosed their extreme likeliness to book their plane tickets and hotel on a mobile device are India, Thailand, South Korea, Hong Kong, and Taiwan.

From a total of 600 Thai respondents surveyed who had taken an average of either 11 personal or 10 business flights per year, 67 per cent have said that they are extremely likely to book their flight tickets on a mobile device, 18 per cent are somewhat likely and 15 per cent least or not likely to do so.

When it comes to hotel bookings, 70 per cent of the respondents indicate that they are likely to book their hotel using a mobile device, 18 per cent are somewhat likely and 12 per cent least or not likely to do so.

According to a new market research study by AppsFlyer, a mobile attribution company, mobile users in APAC will account for 50 per cent of global apps installed by 2020, which is three times more than in any other region. Growth is forecast to gradually decrease as the market matures but will be sustained by substantial increment in media costs and mobile usage, as well as the overall number of paid campaigns, apps available, and mobile users.