"TISCO" is considering lowering its year-end index target from the previous 1,400 points. "CGS-CIMB" notes that foreign investors continue to sell Thai stocks, expecting total sales to exceed 287 billion baht, setting a new high after already selling 270 billion baht.
The investment landscape in the Thai stock market for 2020 has not been very bright, especially in the first quarter when the SET index plummeted from last year's peak of around 1,850 points to a low of 969 points. The index rebounded strongly in the second quarter, returning above 1,400 points, but has recently dropped back to around 1,250 points, leaving the annual performance still down about 20% from the previous year.
Looking at different investor groups, foreign investors remain heavy net sellers at 270 billion baht, while individual investors bought 200 billion baht, along with institutional investors who purchased 67.5 billion baht, with the remainder coming from brokerage accounts.
Mr. Kriphat Vorachet, Director of Research and Investment Services - Investment Strategy at Nomura Patanasin Securities Public Company Limited (CNS), revealed that the Thai stock market index in Q4 2020 will be volatile, estimating support levels at 1,150-1,200 points and resistance at 1,330 points. In early October, the market may correct to test support levels due to risks from the U.S. presidential election and uncertainties in U.S. trade policies, which Mr. Donald Trump has used as a campaign issue.
Regarding the Stock Exchange of Thailand (SET) returning to normal short-selling rules on October 1, 2020, allowing short sales at prices equal to or higher than the last traded price (Zero Plus Tick), compared to the previous temporary rules requiring short sales at prices higher than the last traded price (Uptick), the market is currently adjusting to accommodate this risk. During the temporary short-selling rules to reduce market volatility, the average short-selling value dropped to 500 million baht per day, down from an average of 3 billion baht per day before the COVID-19 outbreak. It is expected that once normal rules are reinstated, short-selling values will return to pre-COVID-19 levels, depending on how well the Thai stock market and economy recover.
After the results of the U.S. presidential election are known, factors affecting the direction of the Thai stock market in November and December will include the COVID-19 outbreak and vaccine progress, which will impact investor sentiment. Currently, there are no positive signs for foreign investment returning to the Thai stock market, and it will depend on who becomes the U.S. president and the economic policies in place, which will lead global investors to adjust their portfolios. The Asian stock market may benefit, and whether the Thai stock market will gain depends on the recovery of the economy and the performance outlook of listed companies.
For investment in this final quarter, it is recommended to focus on stocks with growth potential, such as food exports, beverages, and electronic components. Investors should hold 25% of their stocks to wait for the right moment to buy during market corrections at the beginning of the quarter. As for the end of Q3 2020, it is expected to see less institutional investor price manipulation for account closing (window dressing) because typically, window dressing occurs in mid-year and at year-end.
Mr. Apichart Phubanjerdkul, Senior Director of Strategic Analysis at TISCO Securities, stated that the outlook for the Thai stock market in Q4 2020 is expected to be downward volatile due to uncertainties from both domestic and international factors. This has led the research team to adjust the year-end index target down from the previous estimate of 1,400 points.
It is estimated that the Thai stock index in the first half of Q4 this year will move in a downward trend due to external pressures, including the U.S. election, which remains uncertain regarding who will be the new leader, the second wave of COVID-19 outbreaks in many countries, and delays in new U.S. economic stimulus measures, which may lead to weaker economic numbers and trigger selling pressure in the coming 1-2 months. Meanwhile, domestic factors are also pressured by escalating political situations, with another major rally planned for October, along with the potential extension of the emergency decree.
In the second half of the quarter, the index is expected to gradually recover as clarity regarding the U.S. election emerges and funds shift from money markets, such as bonds and deposits, into the stock market due to low-interest rates. Additionally, there is expected progress in COVID-19 vaccine development and the profit base of listed companies is anticipated to improve starting from Q1 2021, which will boost investor confidence back to positive as the stock market often reflects future factors.
However, in terms of investment strategy, it is seen as an opportunity to buy when the index declines, with 1,250 points being an interesting level as it has a market PE of only 15 times. Recommended stocks should focus on those that have underperformed the market and have good growth prospects, such as food, medical, and small-cap stocks.
"The research team is in the process of adjusting the year-end index target to around 1,250-1,300 points from the previous estimate of 1,400 points, with the lowest index target expected to be around 1,200 points and the highest not exceeding 1,300 points."
Mr. Kitichan Sirisukacha, Senior Director of Research at CGS-CIMB (Thailand), stated that if the global COVID-19 outbreak improves, the index has a chance to recover. However, with the U.S. elections on November 3, global stock markets are likely to experience high volatility leading up to the elections due to uncertainties. The volatility of the Thai stock market will depend on the recovery of the domestic economy and the COVID-19 outbreak. It is expected that the Thai stock market will not experience severe volatility, as other markets have risen while the Thai market rose earlier. However, when other markets decline, the Thai index tends to drop more sharply, and in October and November, listed companies will gradually announce their Q3 2020 results, which are believed to be better than Q2 2020.
As for the direction of foreign investment, it is expected that they will continue to sell Thai stocks as there are still no positive factors to support them, leading to the possibility that this year foreign investors' net sales of Thai stocks could set a new record high, surpassing the previous high of 287 billion baht in 2018. Since the beginning of the year until now (September 24), foreign investors have already net sold 270 billion baht.
It is estimated that the index in Q4 this year will fluctuate within the range of 1,200-1,330 points, with the year-end index projected at 1,280 points. For investment strategy, short-term investors can speculate, but long-term investors should wait for the right moment to buy after the U.S. elections. If the COVID-19 situation improves, it is recommended to buy stocks that will recover from COVID-19, such as retail, refining, and hospital sectors.
SOURCE : www.bangkokbiznews.com
