The November trading range for the SET Index was between 1,610 and 1,640 points, in line with expectations. The peak for the month was 1,640.03 while the nadir was 1,610.75. The overall investment mood and tone were quite bearish due to a lack of catalysts for the market.
Average daily trading volume was slightly above 60 billion baht in November, up just 1% month-on-month. The SET closed at 1,635.36 for the month, up 1.7% from the end of October. November featured two big impact events for the market: the More Return Plc (MORE) trading scandal and the government's revival of the financial transaction tax (FTT), expected to take effect next year.
The wave of suspicious MORE transactions shook confidence in the trading system in late November. In short, a major investor booked more than 4.5 billion baht in buy orders for MORE shares before defaulting. This led to some market turmoil as some small brokers went under, and also played a role in SET daily turnover dropping below 40 billion baht for the first time in two years at 36.8 billion baht.
At the end of November, the Finance Ministry proposed the collection of a 0.055% tax on share trades in 2023, to increase to 0.11% in 2024. This has again rattled confidence in the local market, though we must still wait and see if the tax will actually be imposed as planned.
Central banks around the world, including the US Federal Reserve, European Central Bank and Bank of England, are all expected to increase their policy rates by another 50 basis points this month, down from 75bps previously. However, stock markets have already priced in this slowdown in the pace of rate increases over the past few months.
Although the market is expecting a deceleration in rate hikes, inflation figures in many major economies are still high. The market expects policy rates to continue to climb in the first half of 2023 with a peak at midyear. After that, we should see a pullback as inflation makes a substantial move downward.
RECESSION UNAVOIDABLE
A global recession, looking unavoidable at this point, is being projected by the market for late 2023. In 2024, the Fed Funds rate should be back at 2% as inflation normalises. On the domestic side, the Bank of Thailand hiked its policy rate by 25 basis points to 1.25% in late November and this should be the last increase for this year.
For the month of December, we see a narrow trading range for the SET at 1,610 to 1,650, mirroring November's range. We do not see catalysts in the short term as the tourism rebound has already been accounted for by the market. We believe investors are now waiting to see what the Fed does and says at its meeting next week before making further decisions on investment, including in Thailand.
As third-quarter results came out slightly lower than our expectations and those of the market in general, we see greater downside for earnings going into 2023. With positive factors largely absent, we revised down our SET earnings per share (EPS) forecasts by around 4% for both 2022 and 2023.
The lower EPS projections factor into our new SET target of 1,650 points for end-2022, down from 1,700 previously.
With the SET poised to remain sideways into year-end, we recommend sticking with big-cap stocks with good fundamentals that still have a share price upside. These include BBL, BDMS, CENTEL, CK and PTG.
We see BBL as one of the biggest beneficiaries of the current high interest rate climate. The bank's net interest income in the third quarter jumped 13% quarter-on-quarter and 28% year-on-year. This trend should continue into 2023.
BBL also has more corporate clients than its peers, and these are mainly on floating rates which gives lender an advantage over its peers.
In the healthcare space, BDMS remains our top pick for another month. The hospital group reported a third-quarter profit of 3.4 billion baht, up a solid 35% year-on-year and 27% quarter-on-quarter, 16% higher than our estimate. We continue to expect double-digit profit growth for the fourth quarter and another 15% growth in 2023.
BDMS should benefit from medical tourism; as inbound tourist numbers recover, so should foreign patients, especially from the Middle East, boosting revenue for the rest of the year.
HOTEL REVIVAL
We also like CENTEL which booked a huge jump in revenue of 85% year-on-year for the third quarter. Hotel revenue shot up 259% from a low base in 2021 and quick-service restaurant sales grew 49%. The easing of the Covid-19 situation in Thailand, helping the return of tourism, has been huge for CENTEL. Room rates for the company's hotels have even surpassed the pre-Covid level by 18%. In October, we saw 1.5 million tourists arrive and we expect more for the last two months of the year. For 2023, we expect tourist arrivals to climb to 22 million, more than double the 10 million estimated for 2022, which would help CENTEL book sizeable profit gains next year.
The contractor CK, meanwhile, is expecting to have its biggest backlog ever construction backlog at between 240 billion and 260 billion baht. This includes the Orange Line train (up to 110 billion baht), a hydroelectric power plant in Luang Prabang, Laos (70-80 billion), and several other major projects on hand (60 billion).
Moreover, bidding is expected to open soon for the the Red Line train extension, double-track rail, expressway and motorway projects. These could further expand CK's backlog and help secure revenue and profit for several years. We expect these projects to start contributing to CK's profits from 2023 onward.
The fourth quarter is seasonally the peak of the year for PTG. Travel ramps up and the various holidays translate to a peak in logistical activities. The country's second-largest fuel trader by sales volume is also seeking opportunities in the non-oil businesses. For example, its 4.5-megawatt trash power plant is expected to start construction in early 2023.
The company is investing in several startup projects as it looks for new S-curve businesses to secure future earnings. With oil prices declining, we believe PTG is a good anti-oil stock to accumulate.
