Bualuang Exclusive Investment Outlook March 2017 1
Theme: Trump support global equities Positive Risk Many countries return to stimulate economies. Many government will increase spending and support economy. Thai and Asia economic recovery. Low interest rate and fiscal stimulus will support the economy. Capital inflow into global equities from money market due to searching for higher return and confidence in improving economy Overweight Recommendation Neutral Brexit will be negative for European Economy and Banking. Risk on hard-landing on Chinese economy. Risk of US rate rising Risk on Trump policy Underweight Thai Equities Fund Thai Fixed Income Global Equities Fund Asia/ASEAN Fund US Equities Fund Commodities Thai REITs Global Fixed Income Global REITs Emerging Equities Fund European Equities Fund Japanese Equities Fund US High Yield Fund 1 March 2017 2
Strategy: Liquidity support market Investment % 2017 View Equities Market Thailand 1.3% Positive on strong earnings and economic growth outlook, government stimulus and foreign inflow into the region. US 5.9% Neutral on Global equities from Trump s economic stimulus but there is the risk from Europe. Neutral on US from high Europe valuation. Negative on Europe on risks of banking sectors 1.2% and geopolitical risks like Brexit. Japan 1.2% Negative on low economic growth with risk on Yen. Asia Bond Market Alternatives 9.8% Neutral on improving economy and foreign inflow. Some ASEAN countries faced external debt risk. Thai 0.5% Neutral Focus short-term Thai bond from US rate hike risk. Global 1.2% Negative from risk of Fed rate hike. Thai REITs 0.8% Neutral High dividend yield but risk of rising rate. Global REITs 3.3% Negative Avoid due to the risk of global property slowdown. Gold 9.1% Neutral Long-term return is still lower than equities. Source: Bloomberg 28 February 2017 3
IMF expect better global growth Region 2015 2016 2017 World 3.1 3.4 3.6 Thailand 3.2 3.3 NA USA 1.6 2.3 2.5 Europe 1.7 1.6 1.6 Japan 0.9 0.8 0.5 Asia 6.3 6.4 6.3 ASEAN 4.8 4.9 5.2 Source: IMF January 2017 4
Thailand World Healthcare Technology USA Europe Japan Asia ex Japan Asean Some Markets are expensive 22 P/E Ratio 20 18 18.7 18.3 16 14 12 16.5 16.4 15.2 16.3 16.0 14.5 15.0 16.1 14.1 13.2 15.9 14.2 13.1 12.3 15.3 14.8 10 8 Current Average 5 years Source: Bloomberg 5
OUTLOOK Feb-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 1,800 1,700 1,600 1,500 1,400 1,300 1,200 Thai Equities: Improving Economy support market Improving economy and earnings Monthly Movement Key Highlight %MoM Market decreased from uncertainty over Trump policy and profit taking during earning announcement especially Banking sector. Positive (+) SET 1560-0.9% Negative (-) SET Index เป าหมายน กว เคราะห Thai Economic outlook is improving 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Source: Bloomberg Thai GDP YoY Consensus 2013 2014 2015 2016 2017 2018 Low global interest rate and high liquidity Economic stimulus on domestic consumption and investment Earnings and economy will improve in 2017 Positive Concern over Trump policy Risk of rising interest rate in US market. Risk on Emerging Market credit. Positive on domestic consumption and investment. Expect economy gradually recover from government economic stimulus and flood of foreign inflows, and earnings upward revision and global low interest rate or negative support inflow. Recommendation Overweight to accumulate the funds focusing on domestic sectors including BTP, BKA, BBASIC. 6
World Equities: Cyclical stocks are rising World IT Sep-16 Financials Sep-16 Sep-16 Healthcare Consumer Discretionary Nov-16 Industrials Nov-16 Consumer Staple Energy Jan-17 Materials Jan-17 Utility Telecom OUTLOOK 12 10 490 470 450 430 410 390 370 350 8 6 4 2 0-2 -4-6 Improving Global Economy MSCI All Country 5.9 10.0 Consensus Target Cyclical Stocks are rising 5.0 YTD Performance 8.2 5.2 5.6 6.1 (4.7) 6.2 4.3 1.0 Monthly Movement Key Highlight %MoM Global market increased from confidence on Trump economic policy and better earnings in 4 th quarter 2016. Capital inflow into global equities fund support market. Positive (+) Low interest rate in Europe and Japan and Fed will increase rate gradually Global economy is improving but at low figure Money moving from money market to equities for higher return assets. NEUTRAL World 444 +2.8% Healthcare 208 +5.8% Negative (-) Brexit effect on European banking and economy Declining global earnings outlook. Uncertainty of currency market Concern over trade restriction from Trump policy Neutral on Global market from stimulus from Trump policy to support economic growth. Healthcare is improving but there is the risk from Trump policy. US equities are still relatively expensive. Recommendation Neutral on BCARE B-INNOTECH and B-Global equities. Accumulate the funds especially during the decline. Source: Bloomberg 7
Feb-16 OUTLOOK Feb-16 1,800 Japan Equities: Market face risk of Yen rising Market face risk of Rising Yen Key Highlight %MoM 1,600 1,400 1,200 1,000 120 118 116 114 112 110 108 106 104 102 100 TOPIX Index Consensus เป าหมายน กว เคราะห Yen rising had negative effect on market Yen/USD Monthly Movement Japan market increased slightly from Trump s policy support on global economy, although Yen appreciation is the risk to the market. Positive (+) QE Policy and very low interest rate Government economic stimulus from higher spending and corporate tax reduction NEGATIVE TOPIX 1535 +0.9% Negative (-) Aging population will cause risk of deflation to persist. Successfulness of economic reform to balance budget Risk on sales tax Risk on Trump policy Strong Yen currency Negative on risk on trade war from Trump policy that would affect Japanese exports. Economic and earnings outlook is on slowdown from poor economic recovery. Recommendation Underweight on B- NIPPON from poor earnings from rising Yen and risk of Trump trade war. Source: Bloomberg 8
KOREA Taiwan India Thailand Indonesia Phillipines Vietnam Asia OUTLOOK Feb-16 690 640 590 540 490 440 Asia Equities: Foreign inflow into Asia Market Fund Inflow support uptrend Monthly Movement Key Highlight Asia Market increased from decline in US dollar supporting the foreign inflow into Asia. Chinese economy start to improve and Asia increased from capital inflow. Positive (+) Asia 564 +3.4% ASEAN 718 +1.6% Negative (-) %MoM MSCI Asia ex Japan เป าหมายน กว เคราะห Consensus Decline in USD support Asia inflow M. USD Fund Inflow into Equity YTD 7000 6000 5000 4000 3,819 3000 2000 1,634 1,261 1000 101 52 0-1000 -184-104 6,580 Low interest rate in Europe and Japan and Fed will increase rate gradually Monetary easing in many countries in Asia Earning recovery in Asia market. NEUTRAL Credit Bubbles risk in China Concern over trade restriction on Asia from Trump policy Risk of rising interest rate in US market. Risk on South China Sea conflict. Neutral Capital inflow and improving economy and earnings will support the market but there is the risk on credit bubble in China. Asia would get negative from Trump policy on trade restriction. Recommendation Neutral on B-Asia and B-ASEAN from better growth outlook but there is the risk from Trump policy. Source: Bloomberg 9
OUTLOOK Feb-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 8 7 6 5 4 3 2 1 - (1) (2) (3) Fixed Income: Foreign inflow into Thai Fixed Income Bond price recovered ไทย Thai BMA โลก JPMorgan Global Bond Foreign inflow into Fixed Income like 2016 M. Baht Fixed income foreign inflow 900,000 by year 1,000,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 - (100,000) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 2011 2012 2013 2014 2015 2016 2017 Source: Bloomberg Monthly Movement Key Highlight Thai and global bond yield was lower after concern over Trump s policy uncertainty. Investor don t see Fed Fund rate increase so quickly from policy uncertainty. Positive (+) Poor Global economic growth and low inflation below target of central banks NEUTRAL Thai 263 +0.5% Global 539 +0.4% Negative (-) %MoM Strong recovery in Thai economy Uncertainty of US, Europe and Japanese monetary policies. Risk on high corporate debt in US and China will affect high yield market. Neutral on Thai bond market from higher return. Negative on global bond and US High yield from risk of upward trend in government bond yield. Recommendation invest short-term in BTeasury and invest corporate bond from medium term. Avoid global bond and US High Yield from risk of interest rate increase and Trump policy on growth stimulus will cause bond yield increase. 10
Feb-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 OUTLOOK Feb-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 OUTLOOK 25 20 15 10 % 6.5 6.0 5.5 5.0 4.5 4.0 3.5 % 5 - REITs: Rising from lower bond yield Rising from lower bond yield Thai Global Thai Yield is attractive 6.0 4.5 Thai Market Key Highlight SET REITS 183 +0.2% Thai REITs increased due to lower global and Thai bond yields. Dividend yields of REITs are still attractive. NEUTRAL Global Market Neutral Thai REITs is still attractive with around 6% dividend yield. The risk is the rising US interest rate. Recommendation Neutral in REITs and Infrastructure funds from risk of Fed fund rate hike that will have negative on price. S&P Global REITS 183 +3.2% Global REITs increased due to declining global bond yield. Trump s policy uncertainty support yield lower. Negative on Global REITs. Low return of dividend yield represent unattractive investment during the risk of interest rate rising. NEGATIVE Recommendation Underweight เง นป นผลอส งหาฯ Thai REITs Yield ไทย Source: Bloomberg เง นป นผลอส งหาฯ Global REITs Yield โลก 11
OUTLOOK OUTLOOK Gold: Gold increased after US Dollar decline Gold increased after US dollar drop Key Highlight Gold GOLD (XAU) 1254 USD +4.5% Gold increased after US Dollar declined from concern over uncertainty on Trump economic policy that will have less positive effect on economy. NEUTRAL Neutral from uncertainty of Trump policy. Risk on US rate hike and confidence on equities investment may make investors shift out of gold as safeheaven assets. Recommendation Neutral Oil increased from confidence on OPEC Oil WTI (West Texas) 54 USD +2.3% Oil increased from expected strong global economy and confidence on OPEC output cut plan; however, US crude production increased continuously. Negative from increase in Non-OPEC production, especially US. The actual derivative investment in oil future also costs around 10% carrying loss; that is not suitable for long term investment. NEGATIVE Recommendation Underweight Source: Bloomberg 12
Feb-16 Aug- 16 Dec- 16 Feb-16 Feb-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 36.5 36.0 35.5 35.0 34.5 34.0 33.5 33.0 41 40 39 38 37 36 Foreign Exchange: Baht BAHT/USD BAHT/EURO Key Highlight Baht / USD Baht increased from declining US Dollar globally from concern over uncertainty of Trump policy. Trend of Baht/USD will be stable around 34.5-35.5 Baht/USD. Bloomberg consensus forecast Baht/USD will stay at 36.2 at end-2017. Baht / EURO Baht appreciated against EURO from monetary stimulus from ECB and rising Asia currency from US Dollar decline. Trend of Baht/EURO will be stable to 38.01 at end-2017 from Bloomberg consensus Baht / Yen Baht decreased against Yen after US dollar depreciation against YEN. Bloomberg consensus forecast Baht/Yen to stay around 30.94/100 Yen as of end-2017. 36 35 34 33 32 31 30 29 28 BAHT/100YEN Bloomberg Consensus 28 Feb 17 Q1 17 Q2 17 2017 2018 Baht/USD 34.88 35.60 36.00 36.20 35.60 Baht/ EURO 36.96 37.38 37.39 38.01 39.11 Baht / 100 Yen 31.08 30.96 30.73 30.94 31.05 Baht/British Pound 43.43 43.79 43.50 44.53 45.50 Source: Bloomberg 28 February 2017 13
Feb-16 Feb-16 Foreign Exchange: Global 1.18 USD/EURO Key Highlight 1.16 1.14 1.12 1.10 1.08 1.06 1.04 1.02 1.00 120 118 116 114 112 110 108 106 104 102 100 YEN/USD USD / EURO EURO appreciated against US Dollar after concern over uncertainty of Trump policy. USD/EURO is likely to be volatile in short term but Bloomberg consensus forecast USD/EURO will weaken to 1.05 at end-2017 from ECB QE policy which will be on until at least end-2017. Yen /USD Yen appreciated against USD after concern over uncertainty of Trump policy. Short term of Yen/USD will be volatile but it is likely to keep depreciating in 2017 from QE policy. Bloomberg consensus forecast Yen/USD will weaken to 117 at end- 2017. Bloomberg Consensus 28 Feb 17 Q1 17 Q2 17 2017 2018 USD/ EURO 1.07 1.04 1.03 1.05 1.1 Yen /USD 114 115 118 117 115 USD/ Pound 1.25 1.21 1.2 1.24 1.28 Source: Bloomberg 28 February 2017 14
Performance Market Close % 1Month % 3Months % YTD 2017 % 1Year % 3Year % 5Year Equities Annualized Annualized SET 1,559.56 (0.9) 3.6 1.3 20.0 9.0 9.9 MSCI All Country 444.50 2.8 8.0 5.7 22.2 5.3 8.8 MSCI World Healthcare 207.95 5.8 9.9 8.2 9.8 6.1 14.7 US-S&P500 2,363.64 4.0 8.0 5.9 24.0 10.6 13.9 Europe 3,319.61 2.9 9.2 1.2 17.8 5.4 9.7 Japan 1,535.32 0.9 4.7 1.2 19.7 10.5 15.2 MSCI Asia ex Japan 564.34 3.4 7.6 9.8 26.0 4.1 3.9 China H Share 10,297.96 5.0 4.7 9.6 33.1 4.9 0.9 MSCI ASEAN 717.93 1.6 7.3 6.1 12.3 (1.2) 0.5 REITS Thai REITS 183.24 0.2 (1.1) 0.8 10.5 11.5 12.7 Global REITS 182.79 3.2 7.6 3.3 12.8 8.4 10.1 Commodities GOLD (USD) 1,253.90 4.5 5.4 9.1 2.3 (1.9) (6.8) GOLD (BAHT) 20,700.00 3.5 3.2 4.8 (0.5) 0.2 (4.1) OIL-WTI 54.01 2.3 9.2 0.5 64.8 (19.3) (12.7) Source: Bloomberg 28 February 2017 15
Performance Market Close % 1Month % 3Months % YTD 2017 % 1Year % 3Year % 5Year Thai BMA Government 262.81 0.5 (0.6) 0.5 (1.0) 4.8 4.4 JP Morgan Global Bond 539.03 0.4 0.9 1.2 0.4 (0.1) 0.4 Market Close % 1Month % 3Months YTD 2016 % 1Year % 3Year % 5Year Interest Rate % (basis point) Thai 2 Year 1.59 (6.1) (4.2) (10.8) 10.3 (76.8) (156.2) Thai 1 0Year 2.74 (3.0) 5.0 7.1 61.1 (102.2) (75.4) US 2 Year 1.26 5.6 14.7 7.2 46.7 94.3 97.1 US 10 Year 2.39 (6.3) 0.9 (5.4) 62.8 (25.8) 44.7 Foreign Exchange % THB/USD 34.91 0.9 2.2 % 2.6 2.1 (6.5) (13.0) THB/EURO 36.96 1.9 2.7 1.9 5.8 21.6 10.4 THB/100Yen 30.98 0.4 0.6 (1.2) 1.2 3.3 21.7 EURO/USD 1.06 (1.0) (0.5) 0.8 (3.1) (23.2) (21.2) Yen/USD 112.33 1.3 0.6 4.1 1.5 (9.4) (28.3) Source: Bloomberg 28 February 2017 16
Thai Equities Investment Summary 2016 & 2017 Market 1H 2016 2H 2016 2017 Global Equities Overweight on BTP, BBASIC, BKA Overweight on BCARE Neutral on B-GLOBAL Overweight on BTP, BBASIC, BKA Neutral on BCARE, B- GLOBAL Overweight on BTP, BBASIC, BKA Neutral on BCARE, B- GLOBAL Japan Equities Neutral on B-NIPPON Underweight on B-NIPPON Underweight on B-NIPPON Asia Equities Thai Bonds Overweight on B-ASEAN Neutral on B-Asia Underweight on China Neutral Short term investment on BTreasury/BFIXED and Medium-to-Long Term in Corporate Bond Neutral on B-Asia B-Asean Neutral Short term investment on BTreasury and Medium-to-Long Term in Corporate Bond Global Bonds Underweight Underweight Underweight Neutral on B-Asia B-Asean Neutral Short term investment on BTreasury and Medium-to-Long Term in Corporate Bond Thai REITs Overweight on REITS Neutral on REITS Neutral on REITS Global REITs Underweight Underweight Underweight Gold Neutral Neutral Neutral Oil Underweight Underweight Underweight Note: recommendation is used for portfolio by each risk profile; Overweight is meaning higher weight than Strategic portfolio weight. Neutral is meaning equal weight to Strategic portfolio weight. Underweight is meaning lower weight than Strategic portfolio weight. 17
Investment Outlook Investment Definition 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 Recommendation Recommendation Overweight Neutral Underweight Details Overweight over Strategic Portfolio Neutral on Strategic Portfolio Underweight over Strategic Portfolio 18
Note 2 March 2017 Investment recommendation is the initial assessment of the suitable risk profile of investors. Before any investment decision, investors should consider many factors including financial status, investment objective, time of investment and receive the advice from investment planners. Past performance/performance comparison do not represent the future performance. Investors should study and understand the investment fund, major fund policy, expected return, risk and LTF/RMF and past performance. Fund comparison is published on fund prospectus Comparative fund performance in the same category and past return potentials compared to Percentile. Investor should meet the financial advisor before making investment decision. Some investments on foreign fund may lose from currency risk from no fully hedging position depending on fund manager decision. Investors may lose from the initial investment. Tax benefit alighted with Revenue Department rules. Get the investment advisory and fund prospect at Bangkok Bank or Tel.1333 www.bangkokbank.com Bualuang Asset Management Tel.0 2674 6488 ex 8 www.bblam.co.th 19
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. 20