• Wall Street extends post-Brexit gains: US and European stocks built on post-Brexit gains on Mon as risk appetite revived while WTI crude oil prices held steady around US$45/barrel. Low oil prices would remain a drag on energy shares today.
• Alternate bouts of buying and selling among foreign and institutional investors continue: Foreign and institutional investors have continued to be engaged in a money game of short-term speculative trading with alternate bouts of buying and selling in a sort of sector rotation since the start of the month. In our view, we see scope for Thai stocks to rally further higher but much would largely depend on upside earnings surprises in the banking sector to keep both investors buying Thai stocks going forward.
• SETI looks headed for upper end of historical valuation range: Thai stocks may continue to receive a boost from bullish overseas sentiment today but a recent sharp rally however makes current valuation no longer cheap. Currently the SET index is trading around the upper end of its historical valuation range at 15.7x forward P/E based on FY16 EPS consensus of Bt93/share, a premium to its 5-year trailing average of 15x. To keep the rally going further, more fundamental support may be needed. For this reason, any downside earnings surprises may leave the market at risk of a sharp correction. Support for the SET index is pegged at 1460 points and resistance at 1475 points today.
• Investment strategy: With earnings season just around the corner and limited upside room left from current trading levels, selective earnings plays make sense and there is no reason to chase share prices for the meantime.
(1) Tourism recovery play: Hold onto AOT.
(2) Selective play: Hold onto MAJOR and CMR.
(3) Upside momentum play: Hold onto PTTGC, ERW, BCH and SCN.
Source: poems.in.th / settrade.com
