Daily Strategy for Investors on March 27, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on March 27, 2019, stating that SET yesterday technically rebound, driven by buying pressure on power plants GULF, EA, RATCH, EGCO and BPP including mid caps PTG and RS.

The index closed at 1,632.3 points (+6.4 points) with a trading value of THB 38 billion, (THB 47 billion the previous day). Foreign investors switched to net buy Thai shares by THB 669 million, institutional investors net sold by THB 1 billion. There were net long on SET50 index future by 11,047 contracts.

 

The SET index has partly priced in the risk of the government forming with the Lower House seats of about 240-250 for both sides. Except for the Pheu Thai party gaining more votes of the lower house by about 260-310 seats. Maybank finds it difficult that they can form the government and designate the PM with 376 votes.

So Maybank believes the downside is limited for a case with 260-310 votes where the index should remain at 1585 points, or at an average PER19 for the past 9 years at 14.4x. About the upside, Maybank suggests investors follow the US-China trade talks outcome on March 28 where the US side led by Lighthizer and Mnuchin.

Maybank expects the talks would reach a conclusion after it took more than 8 months. If based on 1) US trade deficit surged to record high in 10 years, 2) the Republican dominated states saw popularity drop, 3) The impact of the trade war on the global economy has spread wider, we believe the trade talks should come to conclusion within the next couple of months.

 

March Investment Theme
The SET this week should swing in a range of 1620/45 points +/- to wait for 3 factors; 1) EC official election results. 2) Progress on US-China trade talks on March 27-28, 3) US bond yield curve. Recommend hold cash no less than 40%. Hold BEM, CPALL and PTTEP

 

Big Issue
The Office of Industrial Economics reported Industrial production in Thailand fell 1.6% in Feb. Members of the UK Parliament took control of the Brexit process by agreeing to hold “indicative votes. Coal price dropped to USD88/ton, lowest in 20 months

 

Stock Pick & Trading Idea
Maybank has a positive view on VGI buying 18.6% of PLANB shares and the overall out of home media industry. The company will gain more bargain power in the medium term. Among its peers, Maybank likes MACO most due to cheap valuation based on PER19 of 16x. Gradually accumulate PTTEP, TP THB150.0, excluding upside from Murphy which valued by ฿8.0/share. In the near term, avoid BANPU as coal price has limited upside.

 

Technical View
The SET index moved sideways in the morning before strong buying pressure took place in the afternoon. It then gained to test the resistance at the lower gap 1637 and upper gap 1643. The sideways movement should stop if the index manages to close the gap and hold above the resistance 1645. If it rebounds intraday, consider selling pressure on resistance 1637 and 1645. If selling is strong, take profit for the next trading cycle.

 

Investment Strategy:
1) Investors with stocks, If rebounds intraday to test the resistance, sell stocks for the next trading cycle.
2) Without stocks, gradually buy stocks if weakens intraday, only for a rebound trading.

 

Maybank sets a support line at 1615 points and 1625 points, while setting a resistance line at  1637 points and 1645 points.

 

Keep an Eye on
1) US-China trade talks on March 27-28.
2) Pheu Thai and other parties announce their stance this morning