B-GUIDE: Market Outlook

Transcription

1 Quarterly Market Outlook: Quarter on 5 th January 2018 Investment Outlook for 1 st Quarter 2018 Accelerating Global Economy Supports the Rising Earnings Equity Thailand US Europe Japan Asia Bond Thailand Global Alternatives Thai REITs Global REITs Gold View Positive on Thai equities The economy and earnings growth are improving. Government stimulus and foreign capital inflow support the investment. Neutral on Global equities Earnings and economies are improving. Neutral on US market due to the high valuation after strong rise. Neutral on Europe market owing to uncertainty of Banking sector from the risk of Brexit. Negative on Japan equities Risk of deflation persists though the economy is recovering from global economic recovery. Positive on Asia equities The economy and corporate earnings are improving as well as foreign capital flow. The cyclical sectors come back to grow strongly. View Neutral on Thai bonds Focus on short term bond due to the risk of rising Fed Fund rate. Negative on global bonds the negative or low interest rates in several countries generate low payoff and the risk of rising Fed Fund rate. US high yield may be affected negatively by US Tax Reform Bill. View Neutral on Thai REITs The dividend income is relatively attractive. Thai interest rate is expected to stay low though there is the risk of the rising US interest rate. Negative on global REITs from the risk of the increase in Fed Fund rate. Negative on gold The investment return of gold is expected to underperform the equities. Demand for safe-haven asset is likely to decrease due to the improving global economy. Disclaimer: This document is produced based upon sources believed to be reliable but their accuracy, completeness or correctness is not guaranteed. The statements or expressions of opinion herein were arrived at after due and careful consideration to use as information for investment and/or buying insurance. Expressions of opinion contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities, insurance and products. The use of any information shall be at the sole discretion and risk of the user. The user should carefully read details in the prospectus before making investment decision, in the factsheet and insurance policy before buying insurance, and in the products factsheet. Please see Disclaimer at the end of the report Page 1

2 return in THB Market Close Range 1 Year % 3Month % YTD % 1Year % 3Year % 5Year 29- (Low-High) Annualized Equities SET 1, SET50 1, MSCI All Country MSCI Healthcare US-S&P500 2, Europe 3, Japan 1, MSCI Asia ex Japan China H Share 11, MSCI ASEAN REITS Thai REITS Global REITS Commodities GOLD (USD) 1, GOLD (BAHT) 20, OIL-WTI Bond Market Thai BMA Government JP Morgan Global Bond Interest Rate % (basis point) Thai 2 Year Thai 10 Year US 2 Year US 10 Year Foreign Exchange % Percentage THB/USD THB/EURO THB/100Yen EURO/USD Yen/USD Please see Disclaimer at the end of the report Page 2

3 3Month 1Year 3Year 5Year 8Year 10Year 20Year 30Year Fixed Income Market: Thai interest rate is likely to stay at low level due to low inflation View: Neutral Figure 1: Thai Bond Yield Curve Figure 2: Foreign fund flow into Thai bond market in 2017 Figure 3: Thai inflation is expected to stay below Bank of Thailand target till 2019 Thai Yield Curve Current End-2016 M. Baht Foreign investment in Thai bond market 1,000, , , , , , , , , ,000 - (100,000) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Thai Bond Market Association Thai Inflation YoY Market movement in Quarter 4 Thai bond yield increased slightly in the last quarter of 2017 especially the medium-to-long term yields due to the increase in the Fed Fund rate in December as expected and the Federal Reserve s forecast for three more rate hikes in 2018 as well as the Fed plan on the balance sheet unwinding. Although the global bond yields rose from the Fed Fund rate hike, the low inflation on domestic market supports small increase in Thai bond yields. Investment View We have neutral view on Thai fixed income. Bank of Thailand s policy rate is expected to be on hold at 1.5%, mitigating the risk of the rising bond yield due to the rising US Fed Fund rate and QE tapering in Europe. We have Negative view on global fixed income from rising interest rate environment even though inflations in many countries are some-what below the central bank targets and have been rising slowly. The major risks on bond markets include the ongoing economic recovery in Thailand, the uncertainties of monetary policies in US, Europe and Japan, and the default risk in the high-yield market. Recommendation For the short-term investment, we recommend to invest in money market fund and short-term deposit. For the mediumto-long term investment horizon, we recommend to invest in Thai corporate bonds due to attractive credit spread. Recommend underweight on global bond and high yield due to the risk of rising rate and the US tax reform bill. Please see Disclaimer at the end of the report Page 3

4 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Dec-15 Thai Equities: Rising from the improving economy and corporate earnings Figure 4: Thai equities market movement 1,800 1,600 1,400 Figure 5: Thai earnings are back to grow Figure 6: Foreign flow in Thai market is lagging the Asean market 8,000 6,000 4, ,000-6,000-8,000-10, ,000 SET Index Target Consensus Thai forward earnings 12 months SET Energy Commerce Materials Bank Transport Foreign Flow into Asean Equities View: Overweight Market movement in Quarter 4 Thai equities kept a strong increase in the 4 th quarter led by the air transport, retail, petrochemicals and energy sectors. The main driver is the better outlook of corporate earnings and foreign inflow into Asian region. Nonetheless, Material sector declined due to the domestic cement price decrease and the Technology sector dropped owing to the concern on deteriorated earnings from the strong Baht which affects their revenue and income. Investment View We have positive view on Thai equities due to the betterthan-expected growth on Thai economy which supports the rising earnings. The analyst consensus also expects the strong earnings growth in Market gets the support from the strong demand in Asia economy and government spending on infrastructure investment. Interest rates remain low; especially Europe and Japan under the negative interest rate policy. This factor will support foreign capital reversal into Asia and Thailand in Lastly, the institutional investors play a major role on the capital market from the gaining popularity on the asset allocation idea. The risks on Thai equities are the uncertainties of Trump s policies on trade restriction and the uncertainties of market during the rising US interest rate which is expected to be raised by three times in The credit risks in emerging market and Chinese corporate debt could derail the market. Recommendation Recommend overweight on Thai equities especially the Thailand Indonesia Phillipines Vietnam Malaysia domestic sectors related to consumption and investment. Please see Disclaimer at the end of the report Page 4

5 Dec-15 Global Equities: Global economy expands more-than-expected, supporting rising market View: Neutral Figure 7: Global equities market movement Figure 8: Earnings are on the rising trend and IMF Figure 9: Strong capital inflow into global equities -27 MSCI World Global forward earnings Target Consensus US Europe Japan China India Fund Inflow into Equities ETF -9 Thailand -5 India Equity Japan Asia Pacific % ETF Size 6 9 Market movement in Quarter 4 Global equities increased in the 4 th quarter, led by US, Japan and Asian stocks; though European markets declined due to the concern over political instability in Spain. Technology, Financial, Consumer, and Energy sectors advanced while defensive stocks such as Utility, Food and Healthcare underperformed. Global equity market absorbed the positive effects from the better-than-expected earnings and expectation of Trump s tax reform bill. The inflows of money markets into equities are from expectation on the US Fed Fund rate increase. Investment View We have neutral view on global equities, supported by the improvement in economic and earnings in Many analysts have upgraded their forecasts of economy and corporate earnings. Interest rates remain low and negative in Europe and Japan; supporting the shifts of short-term money market into equities. Trump s economic policies would support the stronger economy and the investment. Nevertheless, global equities have the major risks on Brexit which will take place in 2019 and delay on Trump s economic policies as well as the Fintech bubbles especially Bitcoin. Lastly, MiFID II, new European regulation to promote the investor protection and investment transparency, which is effective in 2018, would be the risk. Recommendation We are neutral on global equities. We recommend accumulating global equities especially cyclical sectors. Please see Disclaimer at the end of the report Page 5

6 Dec-15 Asia Equities: Corporate earnings benefit from higher Asian demand View: Overweight Figure 10: Asia equities market movement Figure 11: Asian earnings are on the rising trend China India Taiwan Thailand Indonesia Malaysia Singapore Figure 12: Foreign inflow into Asian earnings Million USD 40,000 MSCI Asia ex Japan Target Consensus Asia Forward Earnings 6 Months Foreign Flow into Asia 30,000 20,000 10, ,000 Sep-12 Sep-13 Sep-14 Sep-15-20,000-30,000 Market movement in Quarter 4 Asia equities increased in the 4 th quarter. The supporting factor is foreign capital inflow into Asia; this condition has constituted a tailwind to the equities market and currencies. Chinese and India markets advanced, driven by the expectation of continued improvement in earnings. In addition, Asian earnings growth is likely to decline. Overall, Asia equities market gained due to the better outlook of the economy. Investment View We have positive outlook on Asian equities. The foreign capital is expected to increase in 2018 though decline in the second half of 2017 thanks to low interest rates environment, despite the Fed s rising rate environment. Asian investment is improving resulting from the One-Belt, One-Road project. Therefore, earnings and the economy would continue its resilience. Asia s equities have four major risks. Firstly, high Chinese corporate debt nearly at 200% of GDP has heightened the credit risk. Secondly, Trump s policy on trade restriction would negatively impact the equities market. The risk of rising US rate could deteriorate foreign capital that has flowed into Asia. Finally, geopolitical risk from South China Sea and Korea Peninsula may affect the investor confidence negatively. Recommendation We recommend overweight on Asia especially China and ASEAN equities due to recovery on economy and corporate earnings. The major risk is Trump s trade policy. Please see Disclaimer at the end of the report Page 6

7 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Thailand World Healthcare Technology USA Europe Japan Asia ex Japan Asean Japan Equities: Economic recovery amidst the risk of deflation View: Underweight Figure 13: Japan equities market movement 1,800 1,600 1,400 TOPIX Target Consensus Figure 14: Japanese market rose to the high level 25 Current Average 5 years Figure 15: Foreigners have less appetite on Japanese market P/E Ratio M. USD Foreign Flow into Japan Equities (One Year) Market movement in Quarter 4 Japanese equities increased in the 4 th quarter supported by the Energy and Materials sectors. Better economic outlook on domestic consumption, investment on property sector, and strong tourism growth support market. Moreover, Yen depreciation as a result of massive stimulus from Bank of Japan on the negative interest rate and yield curve control on the long-term yield caused the rising market. Investment View We have negative view on Japan s equities due to the demographic problem of aging population that would lead to the decline in labor force and population. Delay on the structural reforms, which are the plans on increasing in labor force and stimulating the economy, is the major setback on the economy. The government is facing high public debt, which is the risk for an increase in tax rate in the near future. The market risk rose to the high valuation at current P/E of 15.9 above the past five year average at Nevertheless, Japanese market stands the benefit from the ongoing QE policy and negative interest rate together with short-term improvement in the economy, though fiscal stimulus has less affected on the economy due to its lower budget deficit-to-gdp. Recommendation We recommend underweight on Japanese equites. The market is facing major risks including the deflation risk, aging population, high public debts and Yen uncertainty that cause the market volatility. Please see Disclaimer at the end of the report Page 7

8 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Real Estate Investment Trusts (REITs): Rising US interest rate is the major risk for global REITs View: Neutral Figure 16: Thai and global REITs performance (One year) Figure 17: Thai and global REITs dividend yield Figure 18: Rising long-term bond yield 2.7 REITs Performance (One Year) Thai Global One year payoff on REITs Thai REITs % 10 Year bond yield Global REITs % 1.3 Thai REITs: Neutral Thai REITs was higher in the 4 th quarter due to the attractiveness of the REITs dividend yield though the medium-to-long term bond yield rose slightly because of the global bond yield rose from Fed meeting on December, which increased the Fed Fund rate and indicated the raise in the rate by another three times in We have neutral view on Thai REITs. The supporting factor is the attractive dividend yield at around 6-7% from 12-months trailing dividend yield while the risk factors are the rising US interest rate and valuation concern in some REITs after strong rally. We recommend investing in REITs for long term investment to receive dividend income but we are cautious on the short-term investment from the capital loss from risk of rising US interest rate. Global REITs: Underweight Global REITs did not changed aggressively in the last quarter in 2017 due to the rising global bond yield driven by the concern over December s US Federal Reserve meeting which raised Fed Fund rate and signaled the increase in Fed Fund rate by three times in 2018 as well as more unwinding size on the balance sheet We have negative view on global REITs due to its lower dividend yield than Thai one. The risks of the investment are from the rising interest rate under this low interest rate condition and risk of slowdown in global properties in US, Europe and Japan after the strong rise in prices and activities US Germany RHS in the past. We recommend underweighting global REITs and avoiding the investment.

9 Nov-16 USD/Barrel USD/Ounce Commodities: Gold rose from high global liquidity. Oil increased sharply in Q4 View: Underweight Figure 19: Gold price movement Figure 20: Oil price movement Gold Price WTI Crude Oil Price Figure 21: Rising demand on gold from high global liquidity Ounce 74,000,000 USD/Ounce , ,000, ,000,000 66,000, ,000, , ,000, Gold ETF Size Gold Price Gold: Underweight Gold rose in the 4 th quarter due to the rising global liquidity and the decline in US dollar. Investors are increasing appetite on the Gold ETF amidst heightened North Korea tension. Although the long term bond yields increased and real yield from 10 year Treasury Inflation- Protected Securities turned to positive because Trump s tax reform bill has been agreed by Congress and US Federal Reserve signaled more rate hikes in the coming years as well as Mario Draghi, President of European Central Bank, commented to decrease the historic monetary easing policies, Gold performed well in the last quarter of We have negative view on gold due to the rising US interest rate and less monetary stimulus from Europe. The concerns on equities volatilities are receding; therefore, investors are willing to shift out of safe-haven assets such as gold to the riskier assets on equities. Oil: Underweight Crude oil increased sharply in the last quarter of 2017 due to the concern about Middle-East geopolitical risk which threatened Libya and Iran exports as well as OPEC output cut extension. OPEC has intervened the market with production cut by 1.2 million barrels together with Non- OPEC cut at 0.6 million barrels until end of We have negative view on Oil due to an increase in Non- OPEC production, especially US. The oil future curve on derivative market is in the Backwardation that indicates the declining in crude oil price in the future; therefore, recommend avoiding crude oil investment. Please see Disclaimer at the end of the report Page 9

10 Global and Thai Economic Data Real GDP (YoY%) World US Eurozone France Germany Greece Ireland Italy Netherlands Portugal Spain Sweden United Kingdom Japan Asia China Hong Kong India Indonesia Malaysia Philippines Singapore South Korea Taiwan Thailand Vietnam Central Bank Policy Rate US Eurozone United Kingdom Japan Asia China India Thailand Currency Forecast EURO/USD USD/GBP JPY/USD CNY/USD INR/USD THB/USD Economic Forecast Please see Disclaimer at the end of the report Page 10

11 Sep-14 Mar-15 Sep-15 Sep-14 Mar-15 Sep-15 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 3Month 6Month 1Year 2Year 3Year 4Year 5Year 7Year 8Year 9Year 10Year 15Year 20Year 25Year 30Year Global and Thai Fixed Income Market Thai Yield Curve Current End-2016 Maturity 3Month Month Year Year Year Year Year Year Year Year Year Year Year Year Year Thai Term Spread Thai Credit Spread Average Y-2Y 10Y-2Y BBB Rating A Rating AA Rating Global Policy Rate Asia Policy Rate US Europe UK Japan Thailand Philippines India Indonesia China Korea Taiwan Please see Disclaimer at the end of the report Page 11

12 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Jan-18 Thai Equities Market Summary Indicator Price-to-Earning ratio (P/E) Price-to-Book ratio (P/B) Return on Dividend Performance (%) Volatility Index Equity Yield 3Month 6Month 1Year YTD 1 Year SET 1, SET50 1, MSCI Thailand ENERGY 24, BANKING INFO & TECH COMMERCE 44, TRANSPORT PROPERTY MATERIAL 12, FOOD 13, HEALTH CARE 5, PETROCHEM 1, ,900 1,800 1,700 1,600 1,500 1 Year by Sector PETROCHEM HEALTH CARE FOOD MATERIAL PROPERTY TRANSPORT COMMERCE INFO & TECH 1,400 BANKING ENERGY SET50 SET SET Index Target Consensus ,200 1,800 1,600 1,400 1,200 P/E Band PETROCHEM HEALTH CARE FOOD MATERIAL PROPERTY TRANSPORT COMMERCE INFO & TECH BANKING 3Months Earnings Revision 1,000 ENERGY SET50 SET Please see Disclaimer at the end of the report Page 12

13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Jan-18 Global Equities Market Summary Indicator Price-to-Earning ratio (P/E) Price-to-Book ratio (P/B) Return on Dividend Performance (%) Volatility Index Equity Yield 3Month 6Month 1Year YTD 1 Year World IT Financials Healthcare Consumer Discretionary Industrials Consumer Staple Energy Materials Utility Telecom Telecom Utility Materials 1Year by Sector 500 Energy Consumer Staple Industrials Consumer Discretionary Healthcare Financials IT World MSCI World Target Consensus P/E Band Telecom Utility Materials 3Months Earnings Revision 500 Energy Consumer Staple Industrials Consumer Discretion Healthcare Financials IT World Please see Disclaimer at the end of the report Page 13

14 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Jan-18 US Equities Market Summary Indicator Price-to-Earning ratio (P/E) Price-to-Book ratio (P/B) Return on Dividend Performance (%) Volatility Index Equity Yield 3Month 6Month 1Year YTD 1 Year USA-S&P500 2, Info Tech 1, Financials Healthcare Consumer Discretion Industrial Consumer Staple Energy Materials Utility Telecom ,000 2,800 2,600 2,400 2,200 1Year by Sector Telecom Utility Materials Energy Consumer Staple Industrial Consumer Discretion 1,800 Healthcare Financials Info Tech USA-S&P500 S&P 500 Target Consensus ,000 2,800 2,600 2,400 2,200 P/E Band Telecom Utility Materials Energy Consumer Staple Industrial 3Months Earnings Revision 1,800 1,600 1,400 1,200 Consumer Discretion Healthcare Financials Info Tech USA-S&P Please see Disclaimer at the end of the report Page 14

15 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Jan-18 Europe Equities Market Summary Indicator Price-to-Earning ratio (P/E) Price-to-Book ratio (P/B) Return on Dividend Performance (%) Volatility Index Equity Yield 3Month 6Month 1Year YTD 1 Year EURO-STOXX50 3, IT 1, Financials Healthcare 2, Consumer Discretionary 1, Industrials 2, Consumer Staple 3, Energy 1, Materials 2, Utility 1, Telecom 1, ,000 3,800 3,600 3,400 3,200 3,000 2,800 2,600 Telecom Utility Materials Energy Consumer Staple Industrials Consumer Discretionary Healthcare Financials 1Year by Sector EURO- STOXX50 EURO STOXX50 Target Consensus IT 5,000 4,500 4,000 3,500 3,000 2,500 P/E Band Telecom Utility Materials Energy Consumer Staple Industrials Consumer Discretionary Healthcare Financials 3Months Earnings Revision 1,500 IT EURO-STOXX Please see Disclaimer at the end of the report Page 15

16 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Jan-18 Asia ex Japan Equities Market Summary Indicator Price-to-Earning ratio (P/E) Price-to-Book ratio (P/B) Return on Dividen Performance (%) Volatility Index Equity d Yield 3Month 6Month 1Year YTD 1 Year MSCI Asia x JP China H-Share 12, China A-share 3, India 10, Korea 2, Taiwan 10, Hong Kong 30, ASEAN Thailand 1, Malaysia 1, Phillipines 8, Singapore 3, Indonesia 6, Vietnam Vietnam Indonesia 1Year by Country 750 Singapore Phillipines Malaysia Thailand ASEAN 550 Hong Kong Taiwan Korea India China A-share China H-Share MSCI Asia x JP MSCI Asia ex Japan Target Consensus , P/E Band 3Months Earnings Revision Vietnam Indonesia Singapore Phillipines Malaysia Thailand ASEAN Hong Kong Taiwan Korea India China A-share China H-Share MSCI Asia x JP Please see Disclaimer at the end of the report Page 16

17 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Jan-18 Japan Equities Market Summary Indicator Price-to-Earning ratio (P/E) Price-to-Book ratio (P/B) Return on Dividend Performance (%) Volatility Index Equity Yield 3Month 6Month 1Year YTD 1 Year Japan-TOPIX 1, IT Financials Healthcare Consumer Discretionary Industrials Consumer Staple Energy Materials Utility Telecom ,900 1,800 1,700 1,600 1,500 Telecom Utility Materials Energy Consumer Staple Industrials Consumer Discretionary 1Year by Sector 1,400 Healthcare Financials IT Japan-TOPIX TOPIX Target Consensus ,400 2,200 1,800 1,600 1,400 1,200 PE Band 3Months Earnings Revision Telecom Utility Materials Energy Consumer Staple Industrials Consumer Discretionary Healthcare 1, Financials IT Japan-TOPIX Please see Disclaimer at the end of the report Page 17

18 Explanation on Investment Outlook Outlook Positive Neutral Negative Details Positive on the investment over one year forward with risk adjusted Neutral on the investment over one year forward with risk adjusted Negative on the investment over one year forward with risk adjusted Explanation on Recommendation Recommendation Overweight Neutral Underweight Overweight over Strategic Portfolio Neutral on Strategic Portfolio Underweight over Strategic Portfolio Details Please see Disclaimer at the end of the report Page 18