• Funds flow in after referendum ‘yes’ vote: Net foreign and institutional buying of Thai shares was heavy on Mon after Thais voted overwhelmingly in favor of a new charter in last Sun’s referendum. Of particular interest was net foreign buying which rose to the tune of more than Bt6bn. By our estimate, there is scope for additional funds of around Bt8bn to flow in this year, which would boost the SET index by another 10 points based on assumptions that other factors remain largely unchanged.
• Earnings take center stage this week: Domestic factors will likely take a front seat to external factors this week as earnings season is entering its final stretch. The earnings results released so far are generally positive for market sentiment but the valuation looks more worrying. In forward P/E terms, the SET index is inching closer towards the upper bound of its five-year trading average multiples at 17x. At current levels, the gauge is trading above 16.6x forward P/E.
• Bullish sentiment likely to keep buying bias intact in near term: Speculation on ECB and Fed, which may likely kick in over the next few weeks may get Thai stocks re-rated further to 17x forward P/E (~1570 points). Support for the SET index is seen at 1535 points and resistance at 1550-1560 points today. A possible break below this support level could take the main index down towards 1522 points.
• Investment strategy: Today we recommend a selective play on fund flows.
(1) Tourism recovery play: Hold onto AOT.
(2) Selective play: Hold onto CPF and SAT.
(3) Upside momentum play: Hold onto SCN.
Source: poems.in.th / settrade.com
