• Junta-backed charter approved in referendum: The ‘Yes’ vote for Junta-backed constitution should lift sentiment in the Thai stock market today and keep the buying bias intact. However, the passage of the draft charter may not have a meaningly positive impact on fundamentals as the new constituion would make it harder for the new government to launch quick stimulus measures as in the past i.e. first-car and rice pledging schemes though it ensures that a general election will be on track to take place next year. As things stand, much of the country’s economic growth would continue to depend largely on the government’s mega-investment projects, which have been progressing in a gradual manner.
• Earnings season in final stretch: With possible positive earnings surprises in the energy space after better-than-expected results from PTTEP and recent earnings beat in the banking sector, we see scope for FY16 EPS upgrades from pre-earnings season levels. The latest Bloomberg consensus puts FY16 market EPS at Bt93/share, up from Bt92.2/share in the prior month.
• Positive earnings surprises to lift sentiment but much of good news already priced in: Currently the SET index is trading well ahead of fundamentals above its fair forward P/E of 16x at 16.4x. To get re-rated further to 17x forward P/E, an additional boost from fund flows especially through the possible expansion of QE or negative interest rate policy from ECB next month may be needed. In a big-picture sense, resistance for the SET index is pegged at 1570 points and support at 1500 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
