EX­PECT SET TO STAY STRONG, BUT WATCH FOR FED

Bangkok Post - - BUSINESS -

AAs far as do­mes­tic liq­uid­ity is con­cerned, low in­ter­est rates and a huge cur­rent ac­count sur­plus im­ply that over­all liq­uid­ity re­mains more than am­ple. All things con­sid­ered, there is good chance that Thai mar­ket should be able to main­tain its up­ward trend.

De­spite the re­cent mar­ket rally of around 5.3% since late Au­gust, how­ever, the SET re­mains a lag­gard com­pared with other mar­kets. For in­stance, the MSCI Asia ex-Ja­pan in­dex has risen by 29.8% for the year to date, against just 6.1% for the SET.

In terms of mar­ket val­u­a­tions mea­sured by price/earn­ings ra­tios, the Thai mar­ket re­mains at a deep dis­count com­pared with the MSCI Asia ex-Ja­pan as the ra­tio cur­rently stands near -2 stan­dard de­vi­a­tion. This also im­plies that there is plenty of room for Thai­land to catch up with re­gional mar­kets.

Nonethe­less, some near-term head­winds could arise from this week’s meet­ing of the Fed­eral Open Mar­ket Com­mit­tee. It is a fore­gone con­clu­sion that the Fed will keep its key in­ter­est rate un­changed, and it is also ex­pected to of­fi­cially an­nounce plans for bal­ance sheet nor­mal­i­sa­tion. How­ever, in­vestors will watch closely for any guid­ance on up­com­ing mon­e­tary pol­icy ad­just­ments. Any un­ex­pected mes­sages could still cause near-term mar­ket jit­ters.

The Bank of Ja­pan will also meet this week, though the im­pact on mar­kets will be fairly lim­ited as the bank is widely ex­pected to main­tain its pol­icy stance.

Geopo­lit­i­cal de­vel­op­ments, espe­cially those re­lated to North Korea, could still un­der­mine pos­i­tive mar­ket mo­men­tum. In the short term, we ex­pect the SET In­dex to hover in the range of 1,640 to 1,680 points.

Our stock picks for this week are PTTEP, KCE, BLA and WHAUP. The share price of PTTEP in par­tic­u­lar has been lag­ging and should turn pos­i­tive in line with the re­cent re­cov­ery of global oil prices as US refin­ing ac­tiv­ity picks up af­ter storm Har­vey. KCE shares have suf­fered from the sharp rise of cop­per prices in re­cent months, but should con­tinue to firm up now that cop­per prices are eas­ing. Im­prov­ing de­mand for elec­tronic com­po­nents from key global mar­kets is also help­ing.

Mean­while, there is a good chance that bond yields will creep up this week given that the Fed is ex­pected to an­nounce plans to re­duce its bal­ance sheet. This should ben­e­fit BLA as its share price ap­pears to have a high pos­i­tive cor­re­la­tion with bond yields.

Lastly, we add WHAUP to our stock picks for this week as its share price should ben­e­fit from EEC de­vel­op­ment. Given the na­ture of the com­pany, which of­fers util­ity ser­vices (wa­ter pro­cure­ment, power gen­er­a­tion and dis­tri­bu­tion), share price per­for­mance tends to be lack­lus­tre com­pared with in­dus­trial es­tate com­pa­nies that have al­ready moved up steeply. Thus, it would be a good time to start ac­cu­mu­lat­ing the stock.

Isara Ordeedolch­est is se­nior vice-pres­i­dent for in­vest­ment strat­egy with SCB Se­cu­ri­ties.

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