The Stock Exchange of Thailand (SET) has been in the green for two days in a row now as the market welcomed the decision by the Bank of Thailand (BOT)’s Monetary Policy Committee (MPC) to lower the policy interest rate down to its lowest in history.
The MPC unanimously voted to cut the country’s benchmark lending rate from 1.25 per cent to 1 per cent on Wednesday. Additionally, the news of a possible vaccine being developed for the coronavirus also helped sentiment within the SET, said Tisco Research.
The index was slightly up this morning by 3.80 points, or 0.25 per cent, at 1537.94 with a trading value of 33.7 billion baht. The research house noted that risky assets such as equity and oil all went up on Wednesday after the news about the possible vaccine in China came out.
Other positive news includes reports that the US’s private sector has added another 291,000 jobs in January, the largest number of jobs in five years. Meanwhile, there are reports that OPEC could lower its production to compensate for the slowdown in demand during the outbreak. The MPC’s historic decision, the news about the vaccine, and the positive economic numbers from the US should continue to support the SET on Thursday, Tisco Research added.
Shares within the energy sector, such as power plant operator shares, including BGRIM and GULF have dipped by 7.29 per cent and 4.06 per cent, respectively, during the morning session, as their share prices recently surged past the baseline assumption.
As the concerns over the outbreak, which have been looming over the past three months, dissipate, the think tank’s fundamental picks for today include WHA, as the group has targeted land sales of 1,400 rai for 2020, which would represents an increase of 16 per cent. WHA said that its revenue and share of profit expected to increase by 15 per cent, while setting its EBITDA margin at 40 per cent for this year.
The target price for WHA is 4.1 baht. Other top picks on Thursday include stocks that are benefitting from the government’s measures to support the tourism sector (AOT, MINT, ERW, and AAV) and stocks that would benefit from the MPC’s decision (KKP, MTC, THANI, AP, LH, SPALI, DIF, and TFFIF), Tisco Research noted.
However, Noppavee Bukkamana, regional director of GMI Edge, said new investors are seeing that the SET is still on its way down with a high price-to-earnings (P/E) ratio, even with the MPC’s decision to lower the policy interest rate down to 1 per cent.
He said the MPC’s decision added positive sentiment to the market, which has been hit hard by the bad news from the outbreak, the delay in the approval of the government’s 2020 budget, and drought. But this does not mean that these risks have disappeared.
“Generally, a cut to the interest rate would boost the market every time because of new liquidity and added confidence, but the SET is still on a downward trajectory,” he said. “The forward and historical P/E at the end of January at 15.2 and 18.4 times, respectively, are higher than the average of other bourses in Asia, which stand at around 12.9 times and 15.4 times. This mean that Thai shares are still expensive even though their valuation has sharply dropped.”
With Wednesday’s policy interest rate cut, Noppavee recommends investors look at stock dividends, as the SET has reported that the dividend yield at the end of January was at 3.4 per cent, which is higher than Asia’s average of 2.9 per cent. This would pose an opportunity for investors who prefer a lower risk.
At the meantime, real estate investment trusts (REITs) are also interesting, as lowered interest rates do not affect them, especially for investment in projects that continue to create fund flow. Another asset that investors should look at are digital assets such as crypto currency, as Bitcoin is reaching US$10,000 per coin and should excel if it can push pass this psychological mark.
“Every time that Bitcoin halves its supply within the market, the price will always be up. This would happen in May, where the prices are already showing a positive response,” he said.