August was a special time for the Thai market. At the beginning of the month, the Stock Exchange of Thailand (SET) index was at 1,320.86 points as uncertainty prevailed and the market mood was quite dull. The ethics case involving former prime minister Srettha Thavisin was a major overhang for the SET.
The market doesn't like uncertainty. In the lead-up to the court ruling, the index fell further to 1,297.79 points.
When Mr Srettha was found guilty and told to leave office immediately, the SET plunged almost 20 points before clawing back some of those losses.
Yet the Pheu Thai Party picking Paetongtarn Shinawatra to be the country's 31st prime minister revived the market, with a new cabinet being assembled more quickly than expected.
With the major political issues resolved, the SET embarked on an uptrend, ending August at 1,359.07 points, up 66.38 points or 5.1% from Aug 14 when Mr Srettha was removed.
Average turnover for August was 44.8 billion baht, up 22% from July.
The SET has continued to climb in early September, adding another 72.06 points. The market has been testing 1,430 points and is positive for the year-to-date (up 1%) for the first time in 2024. Daily turnover has peaked at an impressive 107 billion baht.
Foreign investors, who had been net sellers since Aug 15, turned into net buyers after the new cabinet was set up in early September. With foreign investors leading the way, the SET is now a bull market, with heavy inflows in the banking and food sectors.
Market sentiment was positively influenced by other factors, including the announcement of a new Vayupak Fund. The Finance Ministry said Vayupak Fund 1 will seek to raise up to 150 billion baht, bringing the total net asset value of the Vayupak Funds to 450 billion.
The proceeds are to be used to purchase stocks, and thus the fund will create significant demand in the Thai market.
Another factor is the long-awaited digital wallet stimulus. The government announced the first payments will go to the poor and disabled starting on Sept 25, totalling around 14 million people, disbursed as cash.
However, handouts to another 30 million people are not expected to take place until the next calendar year.
Finally, the new cabinet already passed the fiscal budget for 2025, meaning disbursement can start on time in October, further improving economic activity. The budget includes funds for the second phase of digital wallet payments to 30 million people.
The confluence of these factors bodes well for market sentiment going into the year-end. Our year-end SET target remains at 1,500 points.
SEPTEMBER PICKS
With the fund inflows, our investment theme leans towards large-cap stocks that should be the target of foreign and local institutions. Our picks this month include Airports of Thailand (AOT), Advanced Info Service (ADVANC), Berli Jucker (BJC) and Ch. Karnchang (CK).
- AOT is one of the major beneficiaries of the improvement in Thailand's tourism industry. We are now entering the tourism high season, during which we expect more than 3 million foreign arrivals per month, with a full-year target of 36 million. New projects have begun, including the addition of a third operator for ground service and new aircraft services that should provide a cushion against lower duty-free income. We expect AOT's profit to normalise this year before rising 16% next year.
- ADVANC remains our top pick for the information and communication technology (ICT) sector. Although there are now only two mobile operators in Thailand, we believe overall growth will be limited. Nevertheless, ADVANC is in a better position to expand into new territory, such as data centres. Overall revenue will be enhanced as more tourists enter the country and utilise the company's prepaid services; it recently increased the pricing of such packages. Note also that ADVANC may not have to bid for a new frequency (850 megahertz) as management believes its current capacity is sufficient for future growth. We expect profit to grow 10% this year and 21% next year.
- In the commerce space, BJC reported a nice net profit of 1.2 billion baht for the second quarter, back to a normal level after paying extra tax in the first quarter. Big C Group, including BJC, has changed its strategy to focus more on food and fresh products. With the new strategy, its same-store sales growth has been improving, as have margins. Like most retailers, the company also stands to benefit from the digital wallet stimulus. In terms of valuation, BJC is still a laggard versus other retailers in the stock market.
- Looking at contractors, CK is one of our top picks. With the 2025 budget having already passed the Senate, we believe the government will focus its spending on building infrastructure, as it usually does. CK's backlog of more than 130 billion baht, which is expected to reach over 200 billion in the near future, secures its profit for several years. Moreover, its subsidiaries -- namely BEM, CKP and TTW -- enjoy strong prospects. This is especially the case for BEM, which is expected to report record profit in 2024 and 2025. The company already won an Orange Line contract and plans to build a double deck on its expressway. CK should benefit from the future growth of BEM.
