Daily Strategy for Investors on April 12, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on April 12, 2019, stating that SET yesterday moved in a narrow range, driven by strong selling pressure on SCC and DTAC while digital TV stocks were heavily bought led by BEC and WORK.

The index closed at 1,659.0 points (-3.0 points) with a trading value of THB 40 billion, (THB 43 billion the previous day). Foreign investors net bought Thai shares by THB 79 million, institutional investors net sold by THB 810 million. There were net short on SET50 index future by 5,450 contracts.

 

Investment Theme: EC approaches the charter court for ruling on seat formula
The Election Commission (EC) yesterday announced it had decided to approach the Constitutional Court after finding it difficult to distribute seats due to the complex election system. The commission was studying laws that stipulate how the party-list MP seats should be distributed. The laws are Section 91 of the constitution and Section 128 of the organic law governing the elections of MPs.

The EC had previously announced that 71,000 votes would translate into one party-list seat based on the March 24 turnout. However, a revised EC calculation method would make it possible for small parties which garnered between 30,000-40,000 votes each to earn at least one MP seat. As a result, at least 25 parties are eligible for party-list seats according to their share of the vote. Investors are recommended keeping updated with the official results further.

Another issue is Thailand’s mobile phone operators using the 900Mhz band and digital TV licensees have been granted a reprieve regarding their concession fees. The move should extend the concession fee payment schedule for mobile phone operators from 4 months to 10 months. It is also expected to help the operators participate in a fresh round of bidding for the 700Mhz and 2600Mhz licenses, which will pave the way for 5G technology in Thailand.

 

April 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) IMF cuts global growth outlook from 3.5% to 3.3%.

 

Stock Pick & Trading Idea
Halt investment in IRPC. 1Q19 earnings are forecast to grow slow at THB 140 million, pressured by lower product spreads and stock gain (including LCM) of only THB 858 million (from stock loss including LCM of THB 4.7 billion in 4Q18). Key extra item is FX gains of THB 132 million. Maybank revised its FY2019-2020 earnings forecast down 6.0-12.3% to THB 9.1 billion and THB 10.1 billion, target price cut to ฿6.50/share from ฿6.70/share.

A blast occurred at Petronas’ Refinery and Petrochemical Integrated Development (Rapid) in Pengerang, Johor, Malaysia, early this morning. This is a mild positive to olefin producers such as SCC and PTTGC. However, Maybank recommends TRADING BUY PTTGC with a target price at ฿83.0/share.

 

Technical View
If slips through 1655 or surges to test 1675, take profit for the next trading cycle: The index is forming the right shoulder of the reversal Head and Shoulders pattern. It is briefly swinging in a range of 1655-1675.

However, since the modified stochastic indicator has approached the overbought zone, and is coupled with the long public holidays next week, so, if it dips below 1655 or rises to test 1675 (the neckline), it is a chance to take profit for the next trading round and wait to buy back again.

 

Investment Strategy
1) Investors with stocks, let profit runs until it reaches resistance 1675. If it fails to breakout, gradually take profit for a short term. But if it dips below 1655, lock profit.
2) Without stocks, gradually buy stocks if weakens intraday to supports 1655 for a rebound trading at 1675.

 

Maybank sets a support line at 1640 points and 1655 points, while setting a resistance line at  1675 points and 1690 points.

 

Keep an Eye on
1) The Constitutional Court to rule on a formula to calculate party-list MP.