Bad quarter still looms despite a more positive week for SET

The Stock Exchange of Thailand (SET) may be in recovery but the second quarter continues to look grim, experts said.

The index ended March with 1125.86 points, down 16 per cent from February. The average daily trading value for SET and Market for Alternative Investment surged 34.8 per cent from the 2019 average to 71.71 billion baht. 

Foreign investors pulled out a net of 78.36 billion baht in February. From year to date, foreign investors have already sold more than 129.33 billion baht worth of Thai shares. 

SET’s Senior Executive Vice President Soraphol Tulayasathien said that the escalation of the coronavirus outbreak has dealt a huge blow to the Thai stock exchange in March. However, the SET Index actually dropped at a slower pace than most ASEAN markets.

“Many businesses, particularly telecommunication service providers, consumer products and foods, as well as retail and medical services, have managed to adapt well to cope with the situation,” he said. “As a result, these industry groups’ indices declined less than the SET Index.” 

In the upcoming period, Soraphol said that apart from the outbreak, investors should also focus on other factors concerning geopolitical tensions that may affect oil prices, adapting business models to cater to changing lifestyles, and volume demand in domestic markets. They should also keep an eye on fiscal and monetary policy to shore up the economy, he added.  

A Good Week   

Wilasinee Boonmasungthrong, research director at Globlex Securities, said the overall situation within the country is beginning to look up after the Cabinet approved a third economic relief package, which could add 2.7-3 trillion baht to the economy.

Investors should look at the OPEC+ meeting on Thursday and the minutes from the Federal Open Market Committee’s March 17-18 meetings as the next focal points, Wilasinee suggested.

Other key events are the US’ reports on its oil reserves, joblessness claims, producer price index (PPI) for March and its wholesale inventory for February which will come out on Thursday. On Friday, China will release its PPI and consumer price index for March. If all of these numbers come out positive, the SET index will continue to recover by Sunday.

Noppavee Bukkamana, regional director of GMI Edge, a company under the UK Investment Institution Group, said Thai shares are gaining in line with other markets around the world as huge stimulus packages are coming from everywhere, including Thailand. 

The stimulus measures around the world have supported the SET to stay above 1200 point so far. This is in comparison to its lowest of 966 point in March, which means that the index has already recovered by 25 per cent since then. 

The index was trading at 1596 on January 2 before trading down to 1025 on March 23. The index closed at 1206 on Wednesday and it was trading at 1227 Thursday morning.

Bad Quarter

Despite the recent good news for the SET, Noppavee said improving shares is not a sign that the economy is recovering as the crisis is affecting the real sector, which differs from the subprime crisis in 2008.

“The Covid-19 crisis is truly affecting the backbone of the Thai economy,” he said. 

“Tourism accounts for 22 per cent of the country’s income which is the highest in the world, followed by the Philippines at 21 per cent and Mexico at 16 per cent… and we still don’t know when this sector will recover,” he added.

He pointed out to SET’s price to book value (P/BV), wherein which previous crises in 1997 and 2008 have brought that ratio down to 0.75. That did not happen this time even though the economy is more severely hit. SET’s P/BV is now 1.32 times as of Thursday morning.

“The overall outlook of the SET index right now does not reflect the true extent of the economic impacts from the outbreak,” he said. “Companies’ quarterly results for the first quarter of 2020 are not reflecting the reality either since the effects of the outbreak actually began in March,” he added. 

He recommended investors wait for the results from the second quarter before deciding to invest as estimations of SET’s earnings per share will definitely drop down further. This means that the index could be “too expensive” at the moment. 

Energy, banks, and transport sectors, which together accounts for more than half of the SET, are still facing uncertainty from the war on oil prices and the increasing non-performing loans, he added.  

Noppavee said the sectors that are outperforming in the market right now are ICT because of social distancing, the need for financial protection against the coronavirus, and basic human necessities, such as food.

Globlex Securities also recommended shares that are targeted by the special Super Savings Funds (SSFX), which was launched on April 1, and includes BJC, DTAC, SCC, TOA, ADVANC, BPP, SCG, JAS, RATCH, IRPC, STA, TRUE, CPALL, INTUCH, GULF, CPF, SPALI, TASCO, TTW and GPSC. 

If the outbreak is contained within the second quarter of 2020, Kasikorn Asset Management expects the index to be around 1350 by the end. This is due to the amount of liquidity being flooded into the index via SSFX and other fiscal and monetary measures, they added. 

Key Highlights from March

Securities market:

  • SET Index closed at 1,125.86 points at the end of March, down 28.7 per cent from the end of 2019 and 16 per cent from the preceding month. Technology, Consumer Products, Agro & Food Industry, and Services industry groups declined at a slower pace than SET Index.
  • In March, foreign investors cashed out a net 78.36 billion baht.
  • The average daily trading value of SET and MAI in March was 71.71 billion baht, a 34.8 per cent jump from the average in 2019.
  • Forward price to earnings (P/E) ratio of SET was 13.4 times at the end of March, while historical P/E ratio was 13.0 times, above the average of the Asian markets at 11.3 times and 12.8 times, respectively.
  • Dividend yield ratio of SET was 4.5 per cent at the end of March, above Asian stock markets’ average ratio of 3.6 per cent.
  • The combined market capitalization of SET and MAI by the end of March amounted to 12.3 trillion baht, down 27.7 per cent from the end of 2019.
  • In the first quarter of 2020, fundraising via initial public offering (IPO) stood at 56.13 billion baht, while the secondary public offering (SPO) amounted to 67.59 billion baht.

Derivatives market:

  • In March, the average derivatives trading volume was 754,133 contracts per day, soaring 40 per cent from February.

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