Positive news spurs 12% SET gain in September

September is likely to be the best month of the year for the Thai equity market.
The SET index climbed steadily since late August when the new prime minister was selected, reaching a peak of 1,471.69 points in late September.
Positive news flooded the market and investment sentiment was upbeat throughout the month, helped by several factors. First, the new government was formed much more quickly than the market expected, with the Pheu Thai Party remaining in the driver’s seat and the new cabinet including familiar faces likely to maintain the policies of the previous government.
Second was the announcement of the state-backed Vayupak Fund 1, aiming to reinvigorate the bourse and improve investor sentiment. The fund seeks to raise 150 billion baht, with investment in the SET starting on Oct 1 and trading of units starting on Oct 7.
The third factor was the US Federal Reserve’s interest rate cut of 50 basis points, which was in line with the market’s expectation. The decision improved fund flows to emerging markets, including Thailand.
Foreign investors were net buyers of more than 27 billion baht in September alone on the SET. The index closed the month at 1,448.83 points, up 89.76 points or 6.6%, with average daily turnover of 61 billion baht, up 35.7%.
The return of foreign investors will be a key factor for the SET to sustain its rise. This is a marked change from the trend earlier in the year.
Through the end of September, foreigners were still net sellers of more than 97 billion baht for the year. We believe the trend shift will remain until the end of the year, with foreigners staying net buyers.
Net buying was also recorded by local institutions, which should be led by the Vayupak Fund, of more than 16 billion baht. Most of the money raised, more than 80 billion baht, has flowed into the bond market.
Also lifting sentiment was the start of the government’s 10,000-baht handout. More than 145 billion baht has been distributed to low-income earners and people with disabilities.
Moreover, we are entering the high season for Thailand’s tourism industry, with consumption and overall economic conditions likely to improve.
With a confluence of positive factors, we should see investment sentiment brighten in the fourth quarter. We have a year-end SET target of 1,500 points.
OCTOBER PICKS
The kick-off of Vayupak Fund 1 has triggered a flurry of local institutional activity, resulting in more net buying of SET100 stocks. Combined with the rise in foreign investor activity, our focus remains on stocks with large market capitalisation. Our picks are the beverage maker Carabao Group (CBG), the contractor Ch. Karnchang (CK), Central Retail Corp (CRC), and Praram 9 Hospital (PR9).
We project CBG’s third-quarter net profit at 726 million baht (up 37% year-on-year and 5% quarter-on-quarter), underpinned by sales improvement. The firm’s market share in energy drinks has ticked up to 24.5% from 24% in the second quarter. Product mix has also improved with a greater proportion of energy drink sales, which offer bigger margins. As such, we expect gross profit margins to improve in the third quarter, supporting our forecast for 43% profit growth this year.
CK remains our top pick among contractors. The company’s current backlog of 130 billion baht, with expectations to exceed 200 billion in the near future, can secure future profits for several years. Parliament’s quick passage of the 2025 budget bill further bolsters sentiment for the construction industry as we believe government spending via investment in infrastructure will pick up. Moreover, subsidiaries BEM, CKP and TTW have solid prospects, especially BEM, which is expected to report new profit highs in 2024, 2025 and 2026.
CRC has been depressed by news that it may need to help Central Group revive Selfridges, the iconic UK retailer in which the group bought out an insolvent European partner. However, Central Group announced a fund from Saudi Arabia has agreed to take a 40% stake. As such, the concern about CRC has eased. Moreover, recent same-store sales growth suggests slight improvement in August, while the upcoming tourism high season should help further. The government’s cash handout scheme means more funds will likely be distributed later this year, which should benefit the retail sector, including CRC.
Finally, healthcare remains a top sector for the fourth quarter and PR9 is one of our preferred stocks in the sector. We appreciate PR9’s increased focus on foreign patients, especially those from the Middle East and Cambodia, Laos, Myanmar and Vietnam (CLMV). We estimate its third-quarter profit at 178 million baht (up 27% year-on-year and 28% quarter-on-quarter), with growth coming from both Thai and non-Thai patients, especially from the Middle East, China and the CLMV countries. The non-Thai segment is growing and usually has higher billings than local cases. For Thai patients, the recent increase in seasonal flu cases has helped grow the outpatient segment. All considered, operations should remain solid into the fourth quarter.