"Brokerage" Concerns Over Political Pressure on Thai Stocks, Predicts Narrow Fluctuations, Awaiting Situation; Warns of Potential Drop Below 1,300 Points if 'Severe and Prolonged'; "Yuanta" Suggests Worst Case Could Hit 1,160-1,230 Points; "Maybank Kim Eng" Recommends Focusing on Safe Stocks and Those Benefiting from Vaccines

Politics is becoming a hot topic again, especially this September. Starting from September 1, there will be a joint parliamentary meeting to consider three draft laws related to national reform, followed by a House of Representatives meeting on September 9 for a constitutional discussion without voting under Article 152.

After that, on September 10, the parliament will consider the report from the committee studying constitutional amendments, followed by meetings on September 16-18 to review the draft budget for the fiscal year 2021, and on September 23-24, a joint session of the parliament will consider all constitutional amendment drafts in the first reading. This is not to mention the large rally by the Thammasat Coalition, scheduled for September 19.

Mr. Apichat Phubanjerdkul, Senior Director of Strategic Analysis at TISCO Securities, stated that political factors are increasingly pressuring investment in the Thai stock market, particularly with the large rally on September 19, which is developing negatively with an escalation of protests and prolonged discussions on constitutional amendments that may not satisfy the protesters in the short term.

This situation has resulted in foreign investors holding back, causing the index to underperform compared to global markets, including the upcoming U.S. elections in November, which will make investors more cautious. The support level is estimated at 1,295-1,300 points, with resistance at 1,350-1,380 points.

"If the political situation is prolonged but not severe and there are no negative news from abroad, the index could stay between 1,300-1,350 points. However, if violence occurs, it may drop below 1,300 points to around 1,280 points. We assign less weight to this scenario, but if the protests end quickly, the index could break through 1,350 points," he said.

For investment strategy, if the index remains within the 1,300-1,350 range, high-risk investors are advised to speculate by selecting individual stocks. Long-term investors should buy when stocks weaken, focusing on stocks that have shown slow price increases and benefit from vaccine progress, such as retail and transportation sectors.

Mr. Wijit Arayapisit, investment strategist at Maybank Kim Eng (Thailand), mentioned that these factors are likely to pressure the Thai stock market significantly in September, predicting that the index may fluctuate sideways.

However, it is essential to closely monitor the situation; if there is no violence, the index is expected to move within the 1,300-1,360 range. If violence occurs, the index may adjust down to the 1,270-1,280 range.

For investment strategy, it is recommended to focus on two themes: safe stocks with high dividends and low price-to-earnings (P/E) ratios, such as MCS Steel Public Company Limited (MCS), which offers a 7% annual dividend and a P/E ratio of only 7, along with growth in the second half of the year from a high backlog.

The second theme includes stocks benefiting from positive vaccine developments, which saw a significant drop in Q2 but show signs of recovery in Q3, such as hydroelectric power companies. Recommended stocks include CK Power Public Company Limited (CKP), tourism sector stocks like Minor International Public Company Limited (MINT), finance stocks like Muang Thai Capital Public Company Limited (MTC), and consumer goods companies like DoHome Public Company Limited (DOHOME), as well as electronics stocks like Delta Electronics (Thailand) Public Company Limited (DELTA) and KCE Electronics Public Company Limited (KCE).

Mr. Natthapol Kamthakru, Director of Securities Analysis at Yuanta Securities (Thailand), stated that Thai stocks in September face several pressures, particularly from domestic politics with the rally on September 19, causing limited upward movement in the index, which continues to underperform regional markets, with support at 1,270-1,300 points and resistance at 1,350-1,380 points.

"In September, political weight increasingly pressures the index, but we need to see if economic stimulus and employment measures can counterbalance domestic political issues," he said.

The company assesses the impact of domestic political issues on the index in three scenarios: the best case, where the protests end quickly leading to negotiations for constitutional amendments by the end of September, the index would reduce its underperformance against the region, currently underperforming by nearly 5%, with an index level of 1,350-1,380 points.

In a neutral scenario, if the protests are not severe but prolonged, the index would be at 1,250-1,270 points. In a worst-case scenario, if violence occurs, looking back to 1992 when political protests caused the index to drop about 16% from its peak, the peak index this time is at 1,450 points, and the index could adjust to 1,160-1,230 points. However, since Thai stocks are underperforming the region, any decline in the index is not expected to be significant, with an estimated downside of 3-5% from the peak, bringing the index to 1,160-1,230 points.

Mr. Natthachat Mekmasin, Assistant Managing Director of Securities Analysis at Trinity Securities, stated that in September, the stock market is expected to fluctuate within the 1,270-1,350 range due to the lack of new positive factors, while political factors must be monitored, including foreign politics with the upcoming U.S. elections and domestic politics with the protests, which could affect the investment atmosphere and may lead to a market correction, preventing foreign investors from returning. However, if stocks are sold off, it is not expected to be significant as current holdings of Thai stocks are already low. If the index rises, it presents an opportunity to take profits, while a significant drop would be the best time to buy.

For investment strategy, it is recommended to invest in four strong groups that can withstand negative factors and show profit recovery in the second half of 2020: 1. Debt management group benefiting from rising NPLs, recommending JMT Network Services Public Company Limited (JMT); 2. Packaging group linked to consumer goods, recommending Starflex Public Company Limited (SFLEX); 3. Oil pump group due to increased demand for oil if no lockdown occurs, recommending PTG Energy Public Company Limited (PTG); and 4. Electronics, recommending KCE.

Mr. Sorapol Veerametkul, Senior Director at Kasikorn Securities, stated that the stock market in September is expected to fluctuate within the 1,280-1,370 range, with key factors being domestic and international political issues, including constitutional amendments and the protests on September 19, as well as international trade negotiations between the U.S. and China and the upcoming U.S. elections in November, where Joe Biden currently leads President Donald Trump by 8%.

If the index adjusts downward, it presents a buying opportunity, as the likelihood of profit forecast adjustments is low, and although political factors may pressure and prolong, they are not expected to be severe.

SOURCE : www.bangkokbiznews.com