The Stock Exchange of Thailand (SET) index closed lower in November after reaching a peak of 1,506 points the previous month. During the second week of November, the index fell below the 1,470 support level and began trading sideways below 1,440 and 1,430 points.
The moving average convergence/divergence (MACD) technical indicator also dipped below the zero line, reinforcing a bearish outlook. Several factors are influencing market sentiment:
US Monetary Policy: The Federal Open Market Committee (FOMC) meeting set for December 17-18 is anticipated to result in an interest rate cut of 25 basis points. However, positive trends in the U.S. economy, such as a GDP growth rate of 2.8% and declining unemployment, along with potential inflationary pressures from the Trump administration’s policies, could impact the Fed’s decision-making.
Domestic Economic Recovery: Thailand’s GDP growth in the third quarter exceeded expectations at 3.0%, largely due to government stimulus initiatives like debt relief and cash handouts. Reduced political tensions have also given the government more leeway in executing economic policies.
Chinese Economy: Chinese equities have begun to show signs of recovery, driven by speculation regarding significant economic discussions scheduled for December. Additional stimulus measures are expected to boost growth, particularly following disappointing results from previous announcements. However, U.S. President-elect Donald Trump has threatened to impose a 10% tariff on all Chinese imports, which could adversely affect exports.
Geopolitical Risks: Although a ceasefire agreement has been reached between Israel and Lebanon, ongoing tensions in the Middle East and the unresolved conflict between Russia and Ukraine continue to present significant geopolitical risks, potentially leading to increased market volatility and pressure on oil prices.
December Outlook:
The SET index is expected to maintain its downward trajectory. Support levels are identified at 1,400 and 1,380 points, coinciding with the 200-day simple moving average. Resistance levels are set at 1,450 and 1,470 points.
In terms of investment strategy, the SET index is anticipated to remain volatile. Given this uncertainty, a short-term trading approach may be advantageous. This strategy should focus on stocks with strong growth potential and high dividend yields, especially when the index approaches support levels or shows signs of an uptrend. Our stock recommendations for December include:
- AAV (Buy, target 3.60 baht): Our valuation for the parent company of budget carrier Thai AirAsia is based on a projected 2025 core price/earnings (PE) ratio of 15.5 times, situated at one standard deviation below the pre-COVID average during profitable years. AAV is expected to outperform the SET index in Q4 2024 and Q1 2025 due to strong growth forecasts.
- CENTEL (Buy, target 44 baht): CENTEL is expected to lead the hotel sector with a forecasted net profit of 1.7 billion baht in 2025, an 18% increase year-on-year. This growth is attributed to the absence of significant expenses in 2024 and the full-year contribution from two renovated hotels in Phuket and Pattaya, which are projected to resume normal operations between late November and early December 2024. Our valuation is derived from a discounted cash flow (DCF) analysis with a 7.6% weighted average cost of capital (WACC) and a 2.5% terminal growth rate.
- CRC (Buy, target 45 baht): The valuation for Central Retail Corp is based on a 2025 PE of 27.5 times, which is at half a standard deviation below the three-year historical average. The current PE of 20 times estimated 2025 earnings presents a considerable discount, and we forecast strong growth prospects for 2024-2025.
- MAGURO (Buy, target 22.50 baht): Our positive outlook for this restaurant operator stems from strong growth potential in Thailand’s full-service restaurant sector and its relatively low market penetration compared to competitors. The stock is attractively valued, especially given the robust earnings growth forecast for 2024–2025, with profits anticipated to reach record levels.
- SISB (Buy, target 40 baht): The international school operator is projected to achieve a net profit of 914 million baht in 2024, reflecting a 35% year-on-year increase. Growth drivers include rising enrolments, nearing the 4,600-student target (up 10% year-on-year), and a 5% increase in tuition fees. Our target price is based on a DCF analysis with a 7.2% WACC and a 3% terminal growth rate.
- SPRC (Buy, target 8.50 baht): The oil refiner is forecasted to report a net profit of 2.5 billion baht in 2024, a significant rebound from a loss of 1.
