Bangkok--7 Oct--Siam Commercial Bank
SCB Securities (SCBS) projects the Stock Exchange of Thailand's composite index will remain volatile and directionless until the end of the 4th quarter of 2015 since external uncertainties continue to undermine investor confidence. Still, the index is likely to climb upon real fundamentals, boosted by restored investor confidence due to stronger economic growth expected in 2016.
Mr. Isara Ordeedolchest, Senior Vice President of the SCBS Research Group's Investment Strategy Department, said the Thai stock market will continue fluctuating and move without clear direction throughout the 4th quarter following the index plunging by 5.7% the previous quarter. External risk factors will remain in the limelight as many uncertainties have shaken investor confidence, particularly the differences in implementation of monetary policies by the central banks of major economies,.
Mr. Isara believes the SET index had not yet changed its direction to a long-term downward trend because the country's economic recession risk remains low. In addition, financial liquidity is still abundant in the global market although the Thai economy has grown less than it should have in recent years. Overall economic stability remains strong, which is key to helping the index resist volatility in the 4th quarter.
"This quarter is still quite inappropriate for investment although overall market liquidity is more than enough. Investors will need to take greater caution because worldwide risks remain high. Stock investors around the world are expected to shift their investment to markets where economic stability is sound, local consumption is stimulated, and stock prices are reasonable. Given these factors, the Thai stock market is considered an attractive destination. The expected interest hike by the US Federal Reserve will have a limited impact on the SET. In the medium term, it will become positive when the overall picture is clear," said Mr. Isara.
Mr. Isara forecast that the Thai economy will enjoy a strong recovery in 2016 since domestic factors, particularly state-supported investment projects, will become more concrete. The short- and medium-term economic stimulus packages announced in the previous quarter will benefit the real economic sector. A recovery in tourism will contribute greatly to local consumption growth. With these supporting factors, the stock market is likely to climb based on its real fundamentals.
Top picks recommended by SCBS in the 4th quarter are stocks in domestic plays benefiting from the government's economic stimulus packages and a recovery in tourism. They include:
· CP All (CPALL), which reported a continued increase in the number of branches and expected profit growth due to the sale of Siam Makro stocks.
· Siam Global Houses (GLOBAL), whose profits are expected to grow strongly, boosted by the economic stimulus packages as all branches are in provincial areas.
· L.P.N Development (LPN), which benefits mainly from the property stimulus package. The stock price has declined lower than the market average and that of other stocks in the same sector while the company's profit is expected to grow strongly with stable revenue.
· Preuksa Real Estate (PS), which benefits from the property stimulus package since risks of contract cancellation and loan rejection will ease. The stimulus package will also contribute to profit growth.
· Airports of Thailand (AOT), which will enjoy a positive outlook on the recovery of hotel reservations.
· True Corporation (TRUE), which plans to increase market share, particularly in the top-up market. The company's costs are set to be reduced and its EBITDA to increase in the future when its 3G/4G networks are completely installed.