Iron ore prices have risen in recent days as markets expect strong restocking demand in China once COVID-19 restrictions are eased and on concerns over Russia-Ukraine tensions. KTBST Securities, therefore, maintained an “Outperform” rating on the retail sector, with a preference for DOHOME, GLOBAL, and HMPRO.
Besides a bullish sentiment in the steel market, KTBST is also positive on the retail sector’s earnings outlook, citing growth and expansion in same-store sales growth (SSSG). Since December 2021, iron ore prices have increased by more than 65 percent, reaching USD150 per ton.
The main factors bolstering steel prices were 1) the Chinese government’s decision to relax pollution control measures following the end of the Winter Olympics. This prompted China’s steel mills to restart production. 2) While China’s GDP growth forecast for 2022 has been reduced to +5.5 percent, the government implemented economic stimulus programs such as interest rate cuts and tax cuts. All of these measures are beneficial to the steel market. 3) Tensions between Russia and Ukraine have an impact on the supply chain.
KTBST favors Dohome Plc. (SET: DOHOME), Siam Global House Plc. (SET: GLOBAL), and Home Production Center Plc. (SET: HMPRO), despite some negative impacts from rising energy and transportation expenses. HMPRO has been chosen as a Top Pick due to its recovery trend and anticipated increase in international tourists in the second half of 2022.
