Daily Strategy for Investors on April 4, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on April 4, 2019, stating that SET yesterday swung in a narrow range, with SCC and SCCC XD. Strong selling pressure was on defensive stocks like electric trains and power plants BEM, BTS, EGCO and GULF. However, PTTGC was heavily bought.

The index closed at 1,649 points (-2.3 points) with a trading value of THB 44 billion, (THB 41 billion the previous day). Foreign investors net sold Thai shares by THB 13 million, institutional investors net bought by THB 271 million. There were net long on SET50 index future by 1,230 contracts.

 

Investment Theme: SET corrects, Global plays become more attractive
The SET index is approaching a correction phase after retesting the resistance at the EMA200Day, which is the same level of the average PER for the past 9 years at 0.5 SD. Maybank assesses that in order for the index to breakout such resistance level, it needs the energy and petrochemicals sectors (accounting for 1/4 of the market) as a driving force.

Key supports for both sectors are 1) China and the US both reported better than expected PMI, meaning a sign of economic recovery, 2) the trade talks between the US and China. The global plays stocks that Maybank likes include PTTEP, PTTGC and BCP. For domestic factors, Maybank shares the same view with the governor of the bank of Thailand (BOT) who voiced his concerns about the politic and economy. The governor said that the faster the government forming, the more confidence from the investment. About the issue that both leading parties compete in forming the new government, Maybank finds it may not be different in terms of the country’s development plan. Initially, Maybank assesses that retail (CPALL, BJC), tourism (AOT, SPA) will have a limited impact from the government forming.

 

2Q19 Investment Theme
The SET in April should swing in the uptrend channel with a range of 1,630-1,680 points. Recommend investors holding cash not less than 40%. BUY global plays stocks like PTTEP, BCP and HOLD BEM and CPALL.

 

Big Issue
1) Global trade falls 0.3% in 4Q18, a 3% growth in 2018.
2) US 10 year treasury bond yield rebound to 2.52% from 2.35% last week.

 

Stock Pick & Trading Idea
Gradually accumulate TU with a target price at ฿21.70/share, expecting 1Q19 earnings of THB 1 billion (+46%YoY, -29%QoQ on seasonal effects) driven by lower tuna raw material prices at USD1,400/ton (-30% YoY). Margin (%) tends to strongly grow to 14.6% from 11.5% the previous year.

Gradually accumulate stocks with 2 themes; sector expected to face limited impact from political factors led by retail BJC with a target price at ฿65.00/share and tourism SPA with a target price at ฿15.80/share and sectors with limited downside, recovering margin with attractive valuation led by BCP with a target price at ฿39.00/share and BCH with a target price at ฿20.00/share.

 

Technical View: Struggles at resistance 1656 and weakens, if holds above 1630, still positive in midterm
The SET index is forming the right shoulder of the head and shoulders pattern. It is struggling to test the resistance at 1656 (EMA200Day) but fails to breakout. In the short term, it is expected to weaken. But if it manages to hold above the key support 1630, this may be a correction for the breakout of the resistance 1656 again. So, if it weakens, it is a chance to accumulate stocks at the supports 1640 and 1630. But if it rebounds, consider selling pressure at resistance 1656 as previously recommended.

 

Investment Strategy:
1) Investors with stocks, continue holding stocks. If rebounds intraday, consider selling pressure at resistance 1656. If fails to breakout, sell stocks for next trading cycle. Wait to buy back stocks at supports.

2) Without stocks, gradually buy stocks if weakens intraday for a rebound trading at 1656.

 

Maybank sets a support line at 1630 points and 1640 points, while setting a resistance line at  1656 points and 1675 points.

 

Keep an Eye on
1) Kudlow to announce the date and venue for Trump and Xi Jinping meeting tonight.
2) Alternative energy operators to ask Administrative Court to consider PDP plan.