Daily Strategy for Investors on March 25, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on March 25, 2019, stating SET yesterday swung in a narrow range with a thin trading value, driven by strong buying pressure on the energy stocks led by PTTEP, TOP and power plants GULF and EA.

The index closed at 1,634.0 points (+6.3 points) with a trading value of THB 39 billion, (THB 36 billion the previous day). Foreign investors continued to net sell Thai shares by THB 757 million, institutional investors net bought by THB 3.2 billion. There were net short on SET50 index future by 4,373 contracts.

 

Investment Theme
Thailand general election will be held on March 24. More than 80% of voters are expected to cast their votes. More than 51 million Thais are eligible to vote in the official March 24 election, accounting for 40.6m votes. The early voting on March 17 saw 86% of voters vs 75% in the 2011 election.

If calculated with the 500 MPs, 81,200 votes per 1 MP. Maybank forecasts 2 scenarios. 1) if the leading parties gain more than 376 seats to form a coalition government, it will be positive to the stock market. 2) if gains more than 251 but not exceed 376, no support from senators, and fails to form a government, this is negative to the stock market.

However, Maybank expects to see the government start to form a government during May. So, in the short term, if the few major parties gain votes indifferently, the SET should swing in a range of 1620-1630 points to wait and see the government forming. During this time, Maybank strategically recommends accumulating stocks in the sectors with limited impact from the election results such as consumption and tourism.

 

March Investment Theme
The SET in March should swing in a range of 1620-1680 points +/-. The market is expected a 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
Commerce Ministry reported exports growth of 5.9% in Feb, better than expected.

 

Stock Pick & Trading Idea
Upgrade to BUY PTTEP with a TP of THB150, excluding the upside from Murphy, worth ฿8.10/share. EBITDA is expected to increase by 15% by 2020. Murphy’s assets are reserves of petroleum (2P) of 274m bbl, equivalent to crude oil (MMBOE) of 27% of PTTEP’s petroleum reserves. Murphy’s proportion consists 37% liquid and 63% gas, making PTTEP’s liquid reserve structure increase to 27% from 25% at the end of 2018. Gas proportion reduces to 73% (see more details in the full analysis).

 

Technical View
The SET index has broken the downtrend channel’s resistance driven by strong buying pressure on the energy, ICT and banking sectors. But it failed to maintain above the resistance zone of 1640-1645. If intraday, if it weakens but manages to hold above the support 1630, the positive momentum should continue. But if it dips below such support level, it will be a false break and switch to swing in a downtrend channel again.

 

Investment Strategy:
1) Investors with stocks, If rebounds intraday, sell stocks to reduce portfolio at resistances. But if dips below 1630, lock profit.
2) Without stocks, gradually buy stocks if weakens intraday, only for a rebound trading.

 

Maybank sets a support line at 1623 points and 1630 points, while setting a resistance line at  1640 points and 1660 points.

 

Keep an Eye on
1) EC considers Brexit extension
2) The result of Thai election on Mar 24.