SCB Securities sees bright outlook for Thai stocks in 2016 with AEC taking effect, continued economic recovery and stability to bring investors back

Stocks and Financial Services Press Releases Monday December 21, 2015 13:18
Bangkok--21 Dec--Siam Commercial Bank

SCB Securities Co., Ltd. views the Thai stock market gaining from the coming ASEAN Economic Community (AEC), with investors seeking new opportunities from the transition of the regional economy. In line with the outlook of a strong economic recovery and sentiments, 2016 will be more interesting for the Thai stock market, which can demonstrate stronger potential to help bring back investors. Amid internal and external pressures, this year the stock market has been vulnerable, sending the index down by 12%. Investors are urged to buy stocks that demonstrate strong performance, with growth potential in line with increasing revenues and the expansion of urban areas in neighboring countries.

Speaking about the overall market, Mr. Isara Ordeedolchest, Senior Vice President of the SCBS Research Group's Investment Strategy Department, said that, "The Thai stock market in 2015 has been fragile, with the SET Index plunging by more than 12% during the past 12 months due to a lower than expected economic recovery, the delay of government budget disbursement, and a deterioration in investor and consumer confidence aggravated by falling stock markets globally, and sharp declines in commodity prices. In 2016, the performance of Thai stock market is seen as improving amid a clearer direction in positive economic sentiments arising from the government's economic stimulus measures, and private investment to help boost confidence and attract investors to return to the Thai stock market. Growth will be complemented by a continuously growing tourism industry. In addition, the official establishment of the ASEAN Economic Community on 31 December 2015 will serve as a good opportunity for Thai investors to expand their investment and consumer base, particularly in Cambodia, Lao PDR, Myanmar, and Vietnam, known as the CLMV countries.

"Thai stock market in 2016 is expected to recover, with a number of positive factors to support economic strength and stability, which would help revive investment in the stock market to attract both local and foreign investors. With the preparation for the establishment of the AEC taking place for some time, investors may not recognize any abrupt change as yet since the market has gradually adjusted. However, businesses have fully realized new investment opportunities, particularly with the expansion of markets for Thai listed companies into the CLMV countries, which have a tendency for higher growth than others in the region. Consumer spending behavior is also changing in line with increasing incomes from the expansion of urban society."

Top picks for 1Q16 will be stocks demonstrating strong performance, with growth potential closely linked to the expansion of neighboring countries, especially when the establishment of the AEC will be taking effect, such as home renovation, hotels and restaurants, entertainment, automobile, financial services, and tourism businesses. Recommended stocks include:

· ASIA Aviation PCL (AAV): Profit is expected to increase with interesting stock valuation. It is viewed that the formation of the AEC will help boost tourism, and its prospects would even be better with increasing business.

· AEON Thana Sinsap (Thailand) PCL (AEONTS): Profit is projected to recover further on the back of loan growth, decreasing loan loss provision, and declining expenses arising from loan loss provision. The company plans to increase revenues from CLMV markets from 1% to 10% in 2020 (or average growth of 43% per year).

· The Erawan Group PCL (ERW): Pricing has slowly adjusted upward, but is likely to receive benefits from the growth of the tourism industry in the hotel business, which cover all the AEC markets. This factor would help contribute profit growth.

· Major Cineplex Group PCL (MAJOR): MAJOR is an interesting stock for long-term investment due to strong profitability. The company eyes expanding its movie theater business from 517 to 1,000 theaters in 2020. Revenues from CLMV are expected to increase from 3% currently to 20% in 2020.

· Siam Cement PCL (SCC): SCC's revenues from the ASEAN market have risen from 12% in 2003 to 22% during the first half of 2015 with new capacity mostly located in ASEAN, which should kick start from 2015-2017.

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