• No pushback on our “domestic theme” strategy; recent 2.3% drop in SET may be an opportunity to accumulate
• Investors agree global volatility to persist in 4Q18
• “Wait and see” on Property sector as BOT regulations will remain overhang
• Optimism on Banks; MTC remains favorite in Finance

Key message and feedback from Strategy Roadshow

We met 21 local institutions during our three-week roadshow. Our positive view on the SET was in line with investor expectations. Most investors agreed that improving domestic fundamentals, pre-election theme, and THB resilience should be supportive of the SET amidst increased external risk. One of the concerns raised was SET valuations limit significant upside (SET was trading at 1,750 or +1.0SD from its 5yr mean at beginning of roadshow). We believe the recent market tumble (Dow Jones fell 3.2%, SET fell 2.3% to 1,690) could just be the opportunity that local institutions are seeking to accumulate. In our view, the sharp drop does not reflect a fundamental market shift but is technical (sharp rise in 10YUSD has historically led to steep drop in Dow Jones).  

Trade tensions, oil price, and USD/THB were points of interest

Investors agreed that global volatility will remain a theme in 4Q18 and drive sentiment. On external front, they have started pricing in US tariffs of 25% on $200bn but not yet the tariffs on remaining $267bn. Investor uncertainty on when trade tensions will ease remains high and is a key concern. Trend of USD/THB was another area of interest and expectations were of a stronger dollar, supported by rising 10YUSD, but factors remain fluid. Surprisingly, there were no questions on Brexit. On domestic front, investors believe BOT is likely to raise rates next year but were concerned that rising oil prices could pressure BOT to raise rates earlier. 

“Wait and see” on Property; Commerce story well known

Investors showed limited interest in the Property sector and decided to “wait and see” as the proposed regulations by BOT (announced during roadshow) has led to market uncertainty. Nonetheless, there were numerous questions on implication of new accounting rules (effective 1 Jan 2019) which offer upside to P&L. Given near-term regulation overhang, we take this opportunity to moderate lower our bullish view on the sector, but we maintain strong conviction on ANAN. For Commerce sector, investors grew more confident on the domestic consumption story as retailers SSSG for upcountry show signs of turning positive (ROBINS SSSG of 0.5% in 3Q18F). It seemed investors were quite familiar with ROBINS and CPALL (top-picks in the sector) story, so discussion was limited. We got the impression that investors will wait for overhang on CPALL to ease before they add to their position.

Bank sector well received; MTC remain top pick in finance

Investors were optimistic on Banking sector. We note that investor sentiment towards the sector has continued to improve post 2Q18 results with a greater focus on the positives. They agreed with our view on BBL, our top-pick (attractive valuations, stronger loan growth and asset quality) but also showed interest in TISCO which offers strong dividend yield. Investors were positive on the Finance sector overall. We did receive some questions on why MTC trades at a premium valuation to SAWAD. We believe it is due to lower concentration risk, higher efficiency and strong growth prospects and asset quality.