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SET looking to rebound from 3-year lows

The Stock Exchange of Thailand plunged by another 6% in October, matching its 6% drop in September, closing the month at 1,381.83 points (down 6.1% month-on-month), with average daily turnover declining almost 5% to only 45.6 billion baht. With these two big drops, the SET hit a three-year low at 1,371.22 points in late October.

A number of sentiment-damaging events took place during October. First was the shooting at Siam Paragon that killed three people. As one of the fatalities was a Chinese tourist, the impact on the tourism sector looked to be severe. Even with the government’s visa-free programme, Chinese tourism has been lacklustre and is likely to fall short of the forecast 5 million arrivals this year.

Second was the Hamas attack on Israel, which led to the breakout of a war that shows no sign of ending soon. Already more than 11,000 people, mostly Palestinians, have been killed during the month-long conflict. After the war started, the price of West Texas Intermediate crude oil quickly shot up past $90 a barrel, while gold surged to more than $2,000 an ounce for the first time in many years.

Lastly, the US 10-year bond yield broke above 5% for the first time in more than 20 years. Against this backdrop, investor fears were heightened, prompting a search for less risky assets.

The third-quarter earnings season is nearly over and bank results came out mostly better than market expectations, especially the big banks. However, banks’ share prices have continued to drop as the market believes interest rates have peaked in Thailand. The policy rate is 2.5% and net interest margins are expected to have also peaked. Meanwhile, concerns continue to surround banks’ non-performing loans and asset quality. These fears will put increased focus on results of the real sector.

We also note that as the baht weakened to over 37 to the dollar in the third quarter, many listed companies, especially in the energy sector, should book sizeable foreign exchange losses due to their foreign loans. The latest Bloomberg consensus suggests that aggregate SET results for the third quarter will be up only 2% from the previous quarter. This reflects the consistent downward forecast revisions made since second-quarter results were announced. As the market considered second-quarter results disappointing, if third-quarter earnings remain little changed, there is risk of another leg down for the SET.

Also, keep an eye on the government’s economic stimulus campaign, especially the 10,000-baht digital wallet. The initial distribution to 56 million people has been pared back to about 50 million, based on Prime Minister Srettha Thavisin’s presentation yesterday. All Thais over 16 with a monthly salary of less than 70,000 baht and deposits of less than 500,000 baht will be eligible. The handout is expected to start in May and will be valid for six months.

The premier also clarified the programme would be funded by a loan of 600 billion baht — 500 billion for the digital wallet and another 100 billion for capacity-building projects.


Given these risks, our investment strategy has become even more selective. We prefer companies likely to announce good results, those with a positive outlook, and those with solid dividend yields that make them more defensive. We pick AOT, BDMS, MC and TASCO.

Thailand’s tourism industry has recovered rapidly this year and Airports of Thailand (AOT) is a direct beneficiary and should turn a profit this year. We project a full-year profit of 7.5 billion baht, a stark reversal from a loss of 11.1 billion in 2022. The outlook is positive as we expect the number of tourists to reach around 30 million this year and continue to grow in 2024, supported by various measures from the government, including free visas to tourists from China and Russia. AOT’s profit next year is projected to jump to 23.2 billion baht.

Healthcare remains one of our favourite sectors given all the risks present in the market. BDMS has long been our top pick for the sector. We expect the hospital group’s third-quarter profit to hit another high at 3.6 billion baht, up 7% year-on-year and 18% quarter-on-quarter. Billing has increased by 16% year-on-year while inpatient numbers should climb around 20% year-on-year. That said, patient volume is growing at a slower pace year-on-year as Covid-19 patients last year accounted for 10% of revenue and growth was 25% year-on-year. For the fourth quarter, we expect growth to come more from the Bangkok area, especially the Eastern Economic Corridor. Special care units, like the Cancer Center, should contribute more to BDMS later in the year.

MC is one of our favourite dividend stocks as it has provided a consistent 6-7% yield per year. When market conditions turn riskier and favour defensive investment, the apparel retailer is typically one of our top picks. Moreover, in 2023, with its strategy shift and continued opening of new shops, MC should generate 35% profit growth year-on-year. We believe this strategy will provide ongoing profit growth for the company, bolstering its ability to pay a dividend.

TASCO, meanwhile, became the talk of the town in late October when the US announced it was lifting sanctions on Venezuela for six months (until April 18, 2024). As a result, the asphalt producer can buy crude oil from PdVSA of Venezuela again. Crude from Venezuela has the highest tarmac yield compared with oil from other countries. We could see TASCO’s profitability jump in the near term. We project profit growth of 17% in 2023 and 30% in 2024. Moreover, TASCO is one of the few stocks to provide a yield of more than 6% per year consistently.

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