EARNINGS WORRIES PUSH SET TO NINE-MONTH LOW

RECAP: Geopolitical tensions, weak economic data and mixed earnings weighed down global stocks and crude oil prices on Friday, with the SET bourse closing at a nine-month low below 1,600 points.

The Thai bourse sank 1.71% on Friday alone on fears of a weak earnings season after a poor third-quarter showing by major banks.

The SET index moved in a range of 1,592.66 and 1,637.49 points before closing at 1,593.28, down 2.3% from the previous week, in turnover averaging 56.71 billion baht a day.

Foreign investors were net buyers of 4.3 billion baht, retail investors bought 3.1 billion and brokerage firms purchased 222.4 million worth of shares. Institutional investors were net sellers at 7.7 billion baht.

NEWSMAKERS: British MPs will decide on Monday whether to approve a general election on Dec 12, as Prime Minister Boris Johnson looks for a new way to break the Brexit logjam. Chances of leaving the EU with a deal on Oct 31 are fading, and opposition MPs say a no-deal exit is not an option. The EU, meanwhile, is said to be leaning towards extending the Brexit deadline until Jan 31.

US President Donald Trump said negotiators are making progress on the text of a partial trade pact with China, which could be ready for signing when he and Chinese President Xi Jinping attend the Apec talks in Chile next month. Facebook CEO Mark Zuckerberg endured hours of prickly questioning from US lawmakers on Wednesday as he defended the company’s ambitious Libra digital currency amid widening scrutiny from regulators.

Beijing is drawing up a plan to remove Hong Kong’s beleaguered Chief Executive Carrie Lam, the Financial Times reported Wednesday, after nearly five months of pro-democracy unrest. Beijing rejected the report as “a political rumour with ulterior motives”.

The European Commission has demanded urgent clarifications from Italy and France on their budget plans for next year, worried they veer widely from spending cut commitments made to Brussels.

Canadian voters returned Prime Minister Justin Trudeau to office last Monday, but he will head a minority government that will rely on support from other parties. Malaysia, the world’s second largest producer and exporter of palm oil, warned on Tuesday against new European Union rules that could hurt demand for the commodity used in foods from snacks to chocolate spread, threatening a US$60-billion industry. Thailand advanced six places to 21st out of 190 countries in the World Bank’s 2020 Ease of Doing Business rankings. Exports shrank by 1.4% year-on-year in September but improved from the 4% plunge in August, boosted by higher shipments of industrial products.

The strengthening baht could breach 30 to the US dollar next year, mainly because of Thailand’s huge current account surplus, says Krungthai Asset Management.

Financial stability will have to play a more prominent role in monetary policy decisions amid subdued inflationary pressure, says Bank of Thailand Governor Veerathai Santiprabhob.

The cabinet on Tuesday approved an additional stimulus package valued at 5.8 billion baht and expects the economy to grow close to its target of 3%, finance minister Uttama Savanayana said. The government’s fresh property stimulus package is seen as insufficient to improve the housing market as homebuyers still cannot access mortgages given stricter loan-to-value limits, says an industry veteran.

The Finance Ministry is considering a temporary cut in the import duty on luxury brands to 5% from 30% as proposed by the Tourism and Sports Ministry to stimulate spending.

The Energy Ministry plans to make gasohol E20 the primary petrol available at pumps, phasing out gasohol E10, says minister Sontirat Sontijirawong. Some 35% of businesses in Thailand said their most significant cyber breach has cost US$1 million or more in damage, according to Cisco’s 2019 Asia-Pacific Chief Information Security Officer Benchmark study.

Bangkok was ranked No.1 in the Mastercard Global Destination Cities Index for international overnight visitors for the fourth straight year.

Thai Airways International (THAI) president Sumeth Damrongchaitham was reported to have told staff that they must cooperate with the airline’s rehabilitation efforts because it is in a crisis and faces possible closure. Mr Sumeth later said his statement had been “misinterpreted” and the airline is not at risk of shutting down.

Eleven SET-listed commercial banks posted a 1.81% year-on-year increase in consolidated unreviewed net profit for the three months through September, while most of them continued to see an uptick in bad loans. Their aggregate net profit for the third quarter amounted to 57.8 billion baht. Kasikornbank (KBank), the country’s second largest lender by assets, has painted a bleak business outlook in 2020, targeting lower net interest margin, a wider range of non-interest income contraction, and higher bad loan ratio. Siam Cement Group (SCG), Thailand’s largest cement maker and industrial conglomerate, is considering cutting its 2019 revenue projection by 5-10%, blaming weaknesses in its petrochemical business.

A debt default by Pace Development Corporation will likely dampen other property developers’ ability to issue new debentures, warns a property industry source. Pace, the owner of the gourmet grocer Dean & DeLuca, told the SET that the company was in default on 2.6 billion baht owed to Siam Commercial Bank. The payment was due on Oct 17.

COMING UP: The EU will release October business confidence on Thursday, with the US announcing preliminary third-quarter GDP data and Germany releasing October preliminary inflation the same day. On Thursday, the US Federal Reserve and the Central Bank of Brazil will announce their interest rate decisions, Britain will release October consumer confidence and the

EU will announce third-quarter GDP data. China will release October manufacturing PMI and Japan will release October consumer confidence. The US will release October non-farm payroll data and manufacturing PMI on Friday.

STOCKS TO WATCH: Capital Nomura Securities recommends an 82% weighting for equities in a portfolio, with a focus on firms expected to see earnings recover in the fourth quarter, such as CPF, GFPT, AOT, ERW, AMATA, WHA, ADVANC, JMART and ICHI. Stocks poised to benefit from low interest rates are SAWAD and AMANAH.

DBS Vickers Securities Thailand recommends fundamental picks including ADVANC, AOT and CPALL. Q4 plays are DREIT, ERW, STEC and TASCO. Good dollar-cost averaging stocks are AOT, BBL, CPALL, BDMS and PTT.

TECHNICAL VIEW: Asia Plus Securities sees support at 1,575 points and resistance at 1,620. Maybank Kim Eng Securities Thailand sees support at 1,550 and 1,580 and resistance at 1,617.