Brokers suggest Thai stocks to benefit from CEWC’s new economic stimulus measure that could push the deficit budget to 4%, higher than the market expectation of 3.5%, in an attempt to restore the economy and the property sector.
The China’s Central Economic Work Conference (CEWC), held on 11-12 December, is expected to result in an announcement of economic stimulus measures in both the intermediate and long term, after the politburo meeting on Monday revealed that Xi Jinping is preparing an expansionary fiscal measure and intermediate expansionary monetary policy, to support country’s economic recovery. This resulted in the bond yield slipping to a record low of 1.89%, while Chinese stock was moving in a positive direction.
China’s economy showed signs of decline in November, led by the property sector. The previous month, special bonds were offered that only utilized 10% of the CNY 800 billion quota, leading to a desire for a bigger stimulus measure.
Krungsri Securities said that any new economic stimulus measure from now on would be beneficial for Thai stocks that are tied to China’s economy, including PTT Global Chemical PCL (SET: PTTGC), Indorama Ventures PCL (SET: IVL), SCG Packaging PCL (SET: SGCP), and The Siam Cement PCL (SET: SCC).
As for the result of CEWC, the securities expect an additional fiscal policy, while the market sees that there could be an announcement of a deficit budget of 4% lower than the market expectation of 3.5% to stimulate the Chinese economy next year. Furthermore, there could be additional measures for the real estate sector.
Daol (Thailand) Securities said that China’s economic stimulus measure would benefit stocks in petrochemical and packaging (PTTGC, IVL, IRPC PCL (SET: IRPC), SCC, and SCGP) as increasing consumer purchasing power would improve consumption. The securities believed that SCGP would receive the most benefit as it earns revenue directly from Chinese exports.
The upstream energy group (PTT Exploration and Production PCL (SET: PTTEP) and Banpu PCL (SET: BANPU)) is also expected to benefit from the measure, as increasing purchasing power would also benefit upstream energy demand, the securities believed that PTTEP would receive the most benefit as China is world biggest oil importer.
The logistic group (Regional Container Lines PCL (SET: RCL), Precious Shipping PCL (SET: PSL), Wice Logistics PCL (SET: WICE), Leo Global Logistics PCL (SET: LEO), and SCGJWD Logistics PCL (SET: SKWD)) could also benefit from economic recovery revitalizing transport activity, the securities believed that RCL and PSL would receive the most benefit as freight cost is expected to increase.
The rubber group (Sri Trang Agro-Industry PCL (SET: STA) and North East Rubber PCL (SET: NER)) is also expected to benefit from the measure, as China is the main importer of Thai rubber, especially Standard Thai Rubber (STR) exporting to China is considered to be around 40-50% of all STR export, the securities believed that STA would receive the most benefit as up to 50% of their revenue come from China.
The food exported to China group (Taokaenoi Food & Marketing PCL (SET: TKN), Thai Coconut PCL (SET: COCOCO), and Royal Plus PCL (SET: PLUS)) is also expected to benefit from the measure, as China is the main export market of many businesses, with around 28% of COCOCO revenue, more than 20% of PLUS revenue, and 22-24% of TKN revenue come from China.
