InnovestX Research views the Thai stock market as vulnerable due to heightened domestic political risks, despite anticipating growth in Q2 earnings for listed Thai companies and positive international factors this week.
Selective Buy Strategy Across 4 Themes
InnovestX Research recommends a Selective Buy investment strategy, focusing on 4 key themes:
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Stocks expected to show Q2 profit growth both YoY and QoQ, with reasonable valuations. The focus is on industries outperforming the market YTD, including ICT (ADVANC), TOURISM (MINT), and FOOD (TU BTG OSP).
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Stocks expected to benefit from production recovery (especially in China), with earnings surpassing their lowest point. These stocks’ prices haven’t yet reflected these positive factors, including KCE, SCGP, and PTTGC.
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Small-cap stocks with anticipated strong Q2 profit growth YoY and QoQ, reasonable valuations, and consistent dividend potential. This includes AMATA, AU, KLINIQ, TPAC, and TNP.
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Oil stocks for investors with higher risk tolerance. The easing situation in the Middle East has led to Brent crude oil prices falling to the lower end of the 80-90 USD/barrel range. InnovestX Research suggests oil stocks like PTTEP can be used for hedging.
Short-Term Market Outlook
InnovestX Research predicts short-term volatility for the SET Index, remaining within a range. The lack of new domestic catalysts and political pressures are hindering investment sentiment, causing the SET Index to underperform regional markets.
However, there’s optimism about improved earnings for listed Thai companies starting from Q2 and positive international factors this week. These include the expected improvement in May’s PMI for China and the US due to continuous economic stimulus measures, and the ECB’s monetary policy meeting on June 6th, where the first policy rate cut is anticipated.
Key Points to Watch
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The ISM reported a significant rise in the US services PMI for May, exceeding market expectations. Additionally,the ADP report showed the highest increase in US private sector employment since February, also surpassing forecasts. These factors have increased market expectations of a potential Fed interest rate cut in September.
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The EIA reported an unexpected increase in US crude oil inventories last week, indicating weak fuel demand during the Memorial Day holiday, which marks the start of the US summer driving season.
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The BoC lowered its policy rate by 0.25% to 4.75% yesterday, the first cut in 4 years, following a slowdown in inflation. They signaled further rate cuts if inflation continues to decelerate.
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The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) estimates Thailand’s GDP growth for this year at 2.2-2.7% due to various risk factors impacting the economic recovery. They support short-term economic stimulus measures and suggest adjusting wages according to the economic situation. However, they express concerns about indirect impacts on exports from the US-China trade war. The Prime Minister expects significant economic improvement in Q4 2024 and plans to introduce stimulus measures and discuss tax collection channel expansion with relevant departments.
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The Constitutional Court has scheduled a hearing on June 12th regarding the Election Commission’s request to dissolve the Move Forward Party, after the party submitted their clarification on the accusations on June 4th.
Warning : Investment contains risk. Investor should understand product features, conditions of return, and risk before making investment decisions.
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