In the past week, the SET Index established a new base at around 1,610 points following earlier gains. The market focused mainly on the remaining third-quarter earnings of listed companies.
Among the firms covered by Bualuang Securities, combined earnings grew 13% year-on-year (but were down 33% quarter-on-quarter), reflecting the recovery of businesses affected by Covid, higher profits of oil and gas companies, and a solid tourism recovery.
Softer earnings compared with the previous quarter reflected significant inventory loss and narrower gross refining margins at oil and gas firms, and lower Covid-related revenues of companies in the healthcare sector. Shares of companies posting earnings that fell short of expectations (such as CBG) were sold off.
Meanwhile, investors bought back stocks of some companies that provided clear positive guidance (such as SCGP) after releasing their earnings.
We expect the SET to remain in consolidation mode in the coming week. Support is pegged at 1,610 points, while resistance is at 1,630 and 1,640.
Numerous companies will be meeting with securities analysts this week, so expect potential portfolio adjustments by institutional investors once they get a closer look at third-quarter earnings details and the fourth-quarter outlook.
Liquidity drain could also be an issue as some major initial public offerings (IPOs) are in the pipeline and some investors will be looking to reserve funds for share subscriptions.
As well, many companies are due to go XD, among them JASIF, TASCO, GUNKUL, RCL and EPG. Prices of shares trading immediately after dividend distribution sometimes fall; consequently, the market might not return to a recovery phase in the short term.
POSITIVE FACTORS
Following up on company meetings over the past week, securities analysts have been digesting management guidance and updating fourth-quarter and 2023 outlooks for investors to adjust their portfolios accordingly. Among key investment targets are companies that offered positive guidance and whose share prices lag the market. Companies due to hold analysts' meetings this week include PTT, AIT, AH, BGRIM and ITEL.
Among positive economic indicators due this week are official Thai third-quarter GDP, expected to improve to 3.1% year-on-year from 2.5% year-on-year in the second quarter. Elsewhere, inflation readings in Singapore and Japan are expected to show a declining trend. The German purchasing managers' index (PMI) is expected to post a slight improvement but will remain weak, while US PMI is expected to be higher.
Also worth monitoring are the stances of various countries following this week's Apec and G20 meetings for any signals of new initiatives or a material change in direction.
Among negative factors, risk is weighing more heavily on investment sentiment as the SET has approached key resistances. Some factors may trigger profit-taking in certain stocks. They include:
Rapid baht appreciation: Since foreign funds poured into the local bourse when baht was weak at 37-38 to the US dollar, foreign investors now have an opportunity to enjoy both capital gains and forex gains and may take profits in the coming days and weeks.
Domestic politics post-Apec: Political analysts expect clearer signals from major parties and key figures as the general election draws nearer. Once the country's international showcase event ends, pundits believe a House dissolution could come at any time between now and March, and is beyond the ability of markets to predict.
Liquidity drain: Portfolio adjustment by institutional investors and subscriptions to IPOs with substantial market capitalisation could affect fund allotment.
Negative external factors include recession worries in key economies such as the US and the euro zone. Investors should keep an eye on PMI readings, which are still hovering around the 50 level that separates expansion from contraction. As well, energy and commodity prices remain volatile, mainly because of the impact of the war in Ukraine. Energy prices could become a bigger issue depending on how the conflict plays out during the winter months.
Other dramatic moments of international tension could emerge from time to time, North Korea and China-Taiwan being key examples, which could keep the risk appetite of investors at bay.
