An Obama Victory

Good morning,

Written on Nov 8, 2012

I’m re-posting the excerpt from our strategist’s note for you after repeatedly highlighting on the Bloomberg chats yesterday. So far, he has almost been halfway right.

Downside of 3-4% in short-term in the case of an Obama victory 

In the absence of changes to the status quo, market concerns over legislative dysfunctionality could return. If the Republican-controlled House of Representatives refused to increase the federal deficit ceiling in Jan (it increased it seven times with no argument when Bush was president) and Obama declined to use an emergency order to get around the blockage, the US Federal government would seize up. That would hit not just the equity markets, but the economy as a whole.

The Energy and Petrochemical sectors should still be avoided under the case of slowing global growth. Our focus remains domestically-driven stocks with good earnings visibility, given Thailand’s healthy consumption trend. Our YE12 target of 1275 also reflects softening global growth in the approach to New Year.

My view: His ideas pointing that upside could be limited given the Thai market’s current high PER (14.1x for 2012E, and 11.8x for 2013E) and downside could be shielded thanks to the robust earnings growth profile (19% YoY for 2013E vs a 15% regional avg) along with a sexy dividend yield (3.8% for 2013E vs a 3% regional avg) are quite similar as what I told you the past few weeks. Only a catastrophic reversal in the macro view could prompt a deep de-rating of the market, in our view. Good luck.