Investment Strategy

Market Talk
May 15, 2015
Investment Strategy
1Q15 GDP growth, which is going to be reported on Monday, may turn out dull, but the market will get
short-term positive sentiment from hope about continued QE imposition in the Eurozone despite a sign of
economic recovery. Top picks are RCL([email protected]) and VNG([email protected]).
SET Index
Change
Market cap (Bm)
1,497.40
1.45
34,712.44
SET Index vs Policy Rate
SET index
Policy Interest Rate
1800
6
1600
5
1400
Net buy and sell by investor type (Bm)
Foreign
Proprietary Trading
Institution
Retail
1200
-753.52
329.78
-746.57
1,170.31
4
1000
3
800
600
2
400
1
200
0
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Jul
Jan
Jul
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Jan
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Jan
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Jan
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0
Referendum may delay general election to mid 2016
Initially, referendum on the new charter draft was not prescribed in the current interim charter. However, the referendum has
been suggested by many related parties to ensure that the new charter really reflects demands of majority of the country.
Accordingly, the Constitution Drafting Committee (CDC) on May 13 submitted a letter to the prime minister and head of the
NCPO requesting that a charter referendum be held. On the other hand, some views that holding the referendum will take at
least three to four months longer and need a huge budget. However, to hold the referendum, the current interim charter has
to be amended to allow such process, which requires cooperation and authority from the National Legislative Assembly
(NLA), the government, and the NCPO; this issue will become certain in June 2015. The latest charter that had gone
through a referendum was the Constitution of The Kingdom of Thailand B.E. 2550 (the referendum was held on August 19,
2007).
If it is concluded that the referendum will be held, the general election may be delayed from late 1Q16 to mid 2016.
Another important factor before the general election is that the CDC will have to make 12 organic laws and 14
drafts of other acts, which is a hard work.
Positive sentiment from rebound in U.S. labor market, recovery in Eurozone
Porranee Thongyen, CISA Eurozone Eurozone's 1Q15 GDP growth was reported at +0.4%qoq, improving from +0.3%qoq in 4Q14 (versus markets'
License No: 004146
[email protected] projection of +0.5%qoq). France, Italy, and Spain (Eurozone's second, third, and fourth biggest economy, respectively) were
Therdsak Thaveeteeratham with the largest economic growth in two years, while GDP growth of Germany drop from +0.7% in 4Q14 to +0.3% in 1Q15
License No: 004132
[email protected]
Pobchai Phatrawit
License No: 052647
[email protected]
English research reports are a rough translation of our Thai-language
research products. It is produced primarily with time efficiency in mind, so
that English-reading clients can see what the main recommendations are
from our Thai-language research team. Given that this is a rough-and-ready
translation, Asia Plus Securities Company cannot be held responsible for
translation inaccuracies.
The Thai language research reports and information contained therein
are compiled from public data sources and our analysts' interviews
with executives of listed companies. They are presented for
informational purposes only and not to be deemed as solicitations to
buy or sell any securities. Best attempts have been made to verify
information from these vast sources, but we cannot guarantee their
accuracy, adequacy, completeness and timeliness. The analyses and
comments presented herein are opinions of our analysts and do not
necessarily reflect the views of Asia Plus Securities.
as a result of weaker export and purchasing power. EurozoneCs economy has still been rebounding despite negative
sentiment from Greek debt issue, while the economy of the US and the UK has slowed down after rebounding throughout
2014. The ECB is expected to continue using the QE of EUR60bn/month from March 2015 to September 2016.
UK The Bank of England (BOE) revised down the UK's GDP growth forecast to 2.5% in 2015 and 2.6% in 2016 from
2.9% in both years, versus the IMF's projection of 2.7% in 2015 and 2.4% in 2016 (given in April). GBP has appreciated
remarkably, the housing market has been dull, and the manufacturing output has been weak due to slowing purchasing
power.
US Many leading economic figures showed a contrary sign. U.S. labor market has rebounded. Latest initial jobless claims
decreased by 1,000 units to 246,000, and the four-week average dropped by 7,750 to 271,750, the lowest since April 2010.
The unemployment rate also dropped to 5.4% in April but still far from Fed's target of 5% (where Fed would consider policy
rate hike). On the other hand, April producer price index (PPI) fell 0.4% and March consumer price index (CPI) slipped by
0.1%yoy. Since the inflation rate is still far from the target of 2%, Fed would not raise the policy rate in the near future; the
hike is projected in late 2014 or early 2015.
Thailand According to Bloomberg survey, Thailand's 1Q15 GDP is projected to slip 0.7%qoq but grow 3.4%yoy, while we
estimate ThailandCs GDP to fall by 2%qoq but rise 1.6%yoy in 1Q15; the actual figure will be reported on May 18. If
Thailand's actual GDP growth was lower than expected, economists that overestimated the economic growth would revise
down their forecasts.
Foreigners reversed to sell net in Thailand again
Yesterday, foreigners reversed to possess a net sell position in Asia at US$226m: US$169m in Taiwan (after four-day net
buy), US$21m in South Korea, US$14m in the Philippines (fifth day), and US$22m or B754m in Thailand; Indonesia's stock
market was closed on holiday. Institutions reversed to sell Thai stocks at B747m net (after two-day net buy) as well.
Speaking of the bond market, institutions bought net at B12,401m, while foreigners sold net at B2,714m (seventh day). THB
has strengthened for the short term to B33.47/US$.
WORK, BA added in MSCI Index
Morgan Stanley Capital International (MSCI) announced the changes in MSCI Global Standard and MSCI Global Small Cap
indices, which will be effective from June 1, taking place as of the close of May 29, 2015, as follows:
MSCI Global Standard (blue-chip) K No stock is added or deleted in the MSCI Global Standard index. There was no
change in the 32 stocks listed on the review, which account for 85% of Thailand's total market capitalization.
MSCI Global Small Cap (medium- and small-cap) K Fourteen stocks are added in the MSCI Global Small Cap index: BA,
BEAUTY, CBG, EPG, IMPACT, IFEC, MTLS, PLANB, PTG, SIM, SCN, TSE, UNIQ, and WORK; Two stocks deleted from
the index are JMART and TPIPL.
However, according to our statistic since 2008, prices of stocks listed in both indices tended not to increase significantly on
the good news, while prices of stock deleted from the indices usually rose, as shown below:
MSCI Global Standard Share prices had 67% probability to surge by 3% two weeks before the calculation date, and then
continuously declined until the calculation date. On the other hand, prices of deleted stocks tended to fall before the
calculation date, but then rose after being deleted.
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MSCI Global Small Cap Share prices barely changed two weeks before the calculation date; about half of them
rebounded while the rest slipped, making an insignificant change. After that, the prices tended to decline after being added
in to the index. On the other hand, prices of deleted stocks tended to fall before the calculation date, but then rebounded
after being deleted.
Stocks added in MSCI indices may not rise on this good news because their 1Q15 earnings reports taking place in May
have more impact, while change in stocks listed in MSCI indices has only sentiment. This May, we recommend single MSCI
plays with solid fundamental factor and strong earnings. Top picks are WORK(FV@B50) and BA([email protected]).
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Stocks Recommended in Market Talk
Stocks
Start
Date
SPALI
Price
Fair Value
Start
Last
Accumula
ted Return
PER
2015F
PBV
2015F
Dividend
Yield
05-Jan-15
31.96
23.43
19.30
-17.6%
6.04
1.58
6.71
TUF
11-May-15
26.00
20.90
20.50
-1.9%
18.88
1.81
2.65
STPI
05-Jan-15
23.64
16.96
15.50
-8.6%
7.87
2.40
4.84
PTT
08-Jan-15
402.50
341.06
352.00
3.2%
9.93
1.36
3.98
PTTEP
03-Feb-15
140.00
115.03
116.50
1.3%
12.66
1.17
3.86
VNG
09-Apr-15
10.25
7.70
8.00
3.9%
9.76
1.69
4.10
ASK
12-Mar-15
30.10
22.50
19.90
-11.6%
8.31
1.60
8.42
RCL
25-Mar-15
13.10
9.10
9.75
7.1%
22.46
0.82
2.23
Strategist Comment
30-Min Chart
Inexpensive laggard stock with high dividend.
Backlog making up 80% of FY2015 income target.
FY2016 profit to leap 66% from Bumble Bee
Share price substantially absorbed negative factor.
Potential winner of EPC Contractor bid. Likely to win
other projects too, but share price has not risen yet.
Rebounding crude oil price,
LPG price float benefiting PTT.
Crude oil oversupply subsides.
Benefiting petroleum business.
Growing demand, lower cost, high margin,
growing profit, developing new products with attractive
growth story.
Benefiting from policy rate cut.
Low P/E ratio, high dividend yield.
HRCI rising countinuously,
low fuel cost promotes earnings growth.
Accumulated returns since our recommendation
SPALI
-17.6%
-11.6%
ASK
STPI
-8.6%
-1.9%
TUF
1.3%
PTTEP
3.2%
PTT
3.9%
VNG
7.1%
RCL
-20%
-15%
-10%
-5%
0%
5%
10%
Note: In calculating returns from a stock we recommended, we use the average price on the day of our recommendation as cost and compare it with the
recent closing price. This will result in accumulative returns until the day we recommend closing the position to take profit or cut loss.
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