After starting May at 1,667.44 points, the SET closed out the month back near the same level at 1,663.41. The first half of the month saw a fairly sharp downtrend to a low of 1,584.38. But this was followed by a solid rebound in the second half, peaking at 1,663.41 for the month.
The weakness in the first half stemmed from heightened concerns about the global economic situation, high energy and food prices, and fears of monetary policy tightening by the US Federal Reserve and other major central banks.
However, the situation seemed to ease in the second half of the month as Thailand's first-quarter gross domestic product growth beat market expectations at 2.2%. The market also reacted positively to the easing of the Covid lockdown in Shanghai and Chinese economic stimulus policies.
Foreign funds were net buyers of 20 billion baht worth of Thai shares in May, mainly in the second half of the month, raising total foreign net buying to 142 billion baht for the first five months of the year. Average daily turnover in May was 73 billion baht, up 1.8% from April, while the average for the first five months was 83 billion baht.
In early June, the SET declined steadily, shaving off 26.5 points, mainly on inflation fears, especially from oil and food prices. The fears were justified to a degree by the May inflation figure, which came as a shock at 7.1% year-on-year, the highest in nearly 14 years.
On the Covid front, life in Thailand has been almost normal since mid-May when most schools returned to on-site learning. Likewise, most businesses have now ended their work-from-home schemes and workers are returning to their offices. This has been evidenced by massive traffic jams in cities, especially in Bangkok.
Reported figures for Covid-19 cases in Thailand have improved, with new infections per day ranging 2,000 to 3,000 and deaths falling to between 20 and 30 most days. While these figures support reopening, the cost of living has become the big hurdle for full normalisation.
BLAME IT ON OIL
The oil price is one of the key culprits, with derivatives contracts seeing peak levels in Thailand. The price of benzene has exceeded 53 per litre and heavily subsidised diesel has climbed to 34 baht (the ceiling has been set at 35). This has had a significant impact on cost of living, especially transport costs.
Another big factor is the price of cooking gas, which has increased for three months in a row, hitting 45 baht per 15-litre tank. Similarly, food prices have shown broad, significant increases, led by both meats and vegetables. This was reflected in the May inflation figure of 7.1%, a surge from 4.6% in April.
But we expect inflation to peak late in the third quarter and are hopeful that oil prices will decline in the fourth quarter. As such, we expect the severe inflation at the moment to ultimately be more of a hiccup on Thailand's path to economic recovery. Importantly, the country has reopened and tourism should thus regain its status as a pillar of economic growth this year.
We retain a cautious investment strategy with a selective investment approach for now. We still recommend keeping cash at 40-50% of one's portfolio. Our stock picks for this month -- AP, BDMS, BEM and MAJOR -- are companies that operate domestically and are well positioned to capitalise on the reopening theme.
The residential developer AP reported presales for the first five months of this year at 19 billion baht, jumping 39% year-on-year and representing 40% of its full-year target. Management has also maintained its target of launching 65 new projects this year. Everything has stayed in line with growth targets. Another key point for AP is its attractive dividend yield of 4-5% per year.
BDMS UPBEAT
Following the strong first-quarter performance of the hospital group BDMS, management has upped its revenue growth target to 12-15% for this year, from 6-8% previously. The company is upbeat about increased patient flows from the Middle East and the neighbouring CLMV -- Cambodia, Laos, Vietnam and Myanmar -- markets. It has also announced a major investment in the BDMS Silver Wellness & Residence project in the middle of Bangkok. With an investment value of 23 billion baht, the project is expected to start operations in 2029. The company expects revenue of 6-8 billion baht per year from the project and to recoup its investment in 10-11 years. Overall, we see this as a sound investment opportunity in a prime location.
We continue to like the transport giant BEM as a beneficiary of life getting back to normal in Bangkok. Out-of-home activities are growing markedly, as seen in the current reported 1 million cars on expressways per day and weekday ridership of 280,000 for the MRT. Indeed, BEM's performance should improve from the second quarter onwards as normalisation kicks in.
One of the activities we associate with life returning to normal is watching movies in theatres. This, of course, benefits the market-leading cinema operator MAJOR, which reported a net profit for the first quarter at 24 million baht after a 2021 net loss of 120 million. We highlight a strong movie pipeline that should boost MAJOR's performance for the second quarter, including Fantastic Beasts 3, Doctor Strange 2, Top Gun: Maverick, and Jurassic World: Dominion, alongside 11 Thai movies. And the momentum should continue with the second half looking even better than the first half, making 2022 a turnaround year for the company.
