Daily Strategy for Investors on March 20, 2019

Maybank Kim Eng Securities has made an analysis for the trading session of March 20, 2019, stating that SET yesterday experienced a technical rebound, driven by strong buying pressure on the energy sector PTTEP, TOP and domestic plays stocks CPALL and CPN.

The index closed at 1,630 points (+12.5 points) with a trading value of THB36b, down from THB38b the previous day. Foreign investors switched to net buy Thai shares by THB 601 million, institutional investors net sold by THB 274 million. There were net long on SET50 index future by 16,794 contracts.

 

Investment Theme
The trade war has caused the global economy to slow down earlier than expected. Several organizations have cut economic growth forecast this year to 3.3-3.5%. To cope with the economic slowdown, Maybank finds that apart from each country’s fiscal policy, the monetary policy is another key factor.

Investors are recommended following the US Federal Reserve meeting on March 19-20. Maybank expects to see 1) FED holds policy interest rate at 2.25-2.50%, 2) signaling more dovish, expecting the Dotplot for the US interest rate hike from 2.875% to decline to 2.625%. This means the likelihood of US interest rate hike remains only once at the end of the year. 3) Balance sheet cut is gradually reduced from USD50b/month.

These factors may affect the market liquidity to decline slower than expected which is positive to the investment in the risky assets, especially in the emerging market. Another factor to follow is the trade talks between the US and China as it has been officially announced last night that Lighthizer is set to meet with China representatives next week. Maybank estimates it should take more than a few months to reach to a conclusion.

 

March Investment Theme
The SET in March should swing in a range of 1620-1680 points +/-. The market is expected high volatility in March due to political factors both domestic and global. Recommend hold cash no less than 40%. Focus on power plant (EGCO) mass transit (BEM), tourism (SPA), retail (CPALL) and PTTEP is a global play stock.

 

Big Issue
High-speed train linking 3 airports deal delayed to March 28.

 

Stock Pick & Trading
BUY TU at a target price of ฿21.70/share (Upside 17%), strong 1Q19 earnings. Tuna price remains good at USD1,480-1,500/ton, so margin (%) should be strong. Shrimp business benefits from selling price adjustment and expand the market to products with a higher margin. Downside risk declined as it has allocated provision for the legal case of Chicken of the Sea and disclosed the loss-making salmon business in Scotland last year. The earnings for this year are expected at THB 5.9 billion (+12% YoY). Technically, if breaks 18-19, good to go.

 

Technical View
The SET index was able to rebound, driven by strong buying pressure on big caps in the energy, banking and transports sectors. The index regained to hold above the short term resistance at 1623. This has led the index to swing sideways in a range of 1623-1660 again. But with the MACD indicator remaining below the signal line, meaning the negative signal. As a result, it is likely the index may rebound in a short term. Gradually sell stocks to take profit at resistance to reduce portfolio and hold more cash.

 

Investment Strategy
1) Investors with stocks, If rebounds intraday, sell stocks to reduce portfolio at resistances. But if dips below 1623, lock profit or stop loss.
2) Without stocks, gradually buy stocks if weaken intraday, only for a rebound trading

 

Maybank sets a support line at 1612 points and 1623 points, while setting a resistance line at  1640 points and 1660 points.

 

Keep an Eye on
1) Fed meeting on Mar 19-20.
2) BOT meeting on Mar 20.
3) Thai election on Mar 24.