SET eases from 1,500 as momentum slows

The Stock Exchange of Thailand (SET) in October was supported by Vayupak Fund 1, which launched on Oct 1. The fund raised 150 billion baht from the public with its primary objective being investment.
On day one, more than 80 billion baht in new funds entered the bond market. This was surprising as initially we believed the new fund would invest mainly in the stock market. Over the first 10 trading days, we saw flows into the SET of more than 60 billion baht, as well as selling by foreign funds.
With the impact of the Vayupak Fund, the SET index rallied to reach a peak for the year of 1,506.82 points in mid-October. However, the index subsequently retraced its steps and bounced around the 1,450-1,480 channel.
Turnover during the first half of October remained high, continuing the trend from September. We saw daily turnover reach more than 77 billion baht from an average of just 40-45 billion in September. Then, in the second half of the month, average daily turnover returned to the 40-billion-baht level.
The SET closed October at 1,466.04, up a modest 1.2% from the month before. Average daily turnover was 53.7 billion baht, down 11.8% from September. During October, local funds, led by the Vayupak Fund, were net buyers of 34 billion baht, while foreign investors were net sellers of 28.2 billion.
NOVEMBER OUTLOOK
Two events in November will have significant impact on the SET. The first is the US election — Donald Trump won and is set to become the 47th president of the US. The new Trump administration is expected to support trade wars, aiming for a positive net impact on the US.
Trump previously stated he would seek to increase tariffs on goods from China by up to 60%, with tariffs of at least 10% on goods imported from other countries. This should heighten export barriers for countries shipping to the US, including Thailand. It would also impact US inflation, which could make it difficult for the Federal Reserve to lower interest rates as much as initially planned.
Meanwhile, Trump’s plan to lower the corporate tax rate again should create positive sentiment for the US stock market. As such, we expect fund flows back to the US.
The other event to monitor this month is third-quarter local earnings reports. Already banking sector results beat market expectations slightly. However, real sector players, including the energy sector and SCC Group, which announced in early November, all missed forecasts significantly.
There were also continuous downgrades to SET earnings per share, which are currently around 91 baht for 2024. This, alongside the strengthening of the baht since late September, contributed to negative sentiment for the SET this month.
STOCK PICKS
Our investment theme this month is companies reporting strong third-quarter results that are poised to continue performing well in the fourth quarter. Our picks are Advanced Info Service (ADVANC), Amata Corp (AMATA), Com7 (COM7) and CP All (CPALL).
ADVANC reported a solid third-quarter profit at 8.8 billion baht, increasing both year-on-year and quarter-on-quarter, slightly ahead of market expectations. The mobile operator’s business should continue to outperform into the fourth quarter as Thailand enters the high season for tourism. We expect mobile revenue to continue to grow based on average revenue per user improvement and subscriber additions. We note that ADVANC is focusing on its fibre unit after joining with 3BB as this will be a new growth segment.
In the industrial estate sector, we expect AMATA to announce a substantial profit for the third quarter. Its presales have already surpassed our target for the full year, and we recently noted lots of new data centre projects entering Thailand. AMATA has already concluded one data centre deal and is negotiating for two other new projects. With a backlog of more than 10 billion baht and new plots of land ready for sale in Chon Buri, AMATA has a bright future in our view.
COM7 is now entering its peak season. We expect third-quarter profit for the IT retailer to be good, supported by the recently released iPad Pro, which received a good market response. Apple products have remained hot with the fourth-quarter launch of the iPhone 16, which Apple reports have sales surpassing those of the previous model. In addition, COM7 will be a beneficiary of a government tax benefit campaign anticipated at year-end.
Lastly, the convenience store giant CPALL is once again a top pick. With Donald Trump winning, market fears of a trade war and export decline are likely. Hence, we recommend focusing on domestic-facing businesses, such as the retail sector. We believe CPALL will benefit from improved economic conditions, the onset of the high season for tourism, and the government’s campaign to distribute 10,000 baht to 14.5 million people. Ready-to-eat products have gained favour with their higher margins, brightening the gross profit margin outlook for the near future. Though there could be a slight impact from flooding, we believe CPALL will be able to recover quickly.