Time for long-term outlook

The Stock Exchange of Thailand (SET) will continue to fluctuate from the outbreak of the coronavirus, but the fluctuation will be narrower with the attention turning towards its impact on China’s economy. 

According to Chinese state media statistics, the death toll in China from the coronavirus surpassed that of the SARS epidemic of two decades prior, with 908 deaths as of Sunday night. The spike in numbers took worldwide observers by surprise as Friday’s confirmed death toll was just slightly under 500 deaths. The number of confirmed cases also increased to over 40,000 confirmed cases, with over 6,000 of the cases marked as severe.

Capital Nomura Securities is now predicting China’s GDP could expand by 5.6 per cent this year, lower than its previous projection of 5.7 per cent before the outbreak. The prediction is based on the assumption that the outbreak is contained within this month. If the outbreak continues and is not contained until June, the Chinese economy would only grow by 3.9 per cent this year, the firm securities forecast. 

Saharat Chudsuwan, Head of Wealth Advisory, Mutual & Private Fund Business at TISCO Asset Management, said the outbreak is a short-term factor, which is similar to other outbreaks in the past, and that this is a good time accumulate stocks with good long-term growth trajectories. The asset management firm recommended stocks that are related to global megatrends such as shares within the Chinese IT sector.

“This industry has a high growth potential from the demand of consumers in China and from the rest of the world,” he said. “On average, Chinese consumers spend around six hours on the internet every day. In 2018, 59.6 per cent of the population had internet access, which is still less than the US with an access rate of 89 per cent,” he added. 

The Chinese IT companies that the asset management firm has pointed to are: Baidu with a 26 per cent rate of profit per share in 2019, Alibaba with 158 per cent, and Tencent with 50 per cent. They said the prices of all three companies are now lower than their average five years ago. 

The combined profit of shares within the MSCI China Information Technology (MXCNOIT) index, which contains mostly Chinese IT equity, is expected to grow by 36 per cent in 2020, and 21 per cent in 2021. The index’s average price is also lower than its average in the past. 

2020 fiscal year budget

As for the delay in the disbursement of the 2020 fiscal year budget, Nomura said the bill could be re-voted on in the parliament before the end of February, which should help the economy in the second half of this year. For the first quarter, the securities firm expects the Thai economy to expand by 2 per cent, down 0.2 per cent from its previous prediction before the coronavirus outbreak. 

Nomura said the lessening concerns over the coronavirus and the government budget disbursement, which should not be delayed much longer than this month, will support the recovery of the SET. They pointed to shares within the “cyclical play” group (TOP, PTT PTTGC, SCC, CPF, TVO), the “value play” group (BBL, KBANK, KKP), and shares of companies that are related to government spending on investment such as CK, AMATA, WHA, and PYLON.

For this week, they recommend BBL and KBANK because the budget delay will not be too long, while the Bank of Thailand has lowered the policy interest rate to a historic low of 1 per cent. CPALL’s price right now is also interesting for mid- and long-term investors. 

Stock by stock 

VGI is expecting to post its budget for the third quarter of 2019-2020 on Wednesday, with an expected profit of 371 million baht, up 19.8 per cent. This means that its profit in the first nine months of the budget year has increased by 1.029 billion baht, up 26.4 per cent year-on-year. 

Shares within the oil refinery group are still doing badly as crude prices (WTI) dropped below US$50 per barrel on Monday night. 

MBK is planning to build a community mall on a 5-rai area in Pathum Thani Province, worth 500 million baht. The construction is expected to be completed within this year.   

SC profits are expected to grow by 867 million baht in the fourth quarter of 2019, up 26.5 per cent year-on-year, the highest in 14 quarters. This could accumulate to a profit of 1.9 billion baht for the entire year with a high yield of 7 per cent.

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