Daily Strategy for Investors on June 17, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on June 17, 2019, stating that the SET on Friday swung narrowly driven by buying pressure on industrial estate stocks WHA, AMATA and power plants and electric train like BEM, BTS, CKP, GULF, EGCO and EA.

The index closed at 1,672.3 points (-1.8 points) with a trading value of THB42b (THB55b the previous day).     Foreign investors continued to net buy Thai shares by THB349m. Institutional investors net sold by THB320m. There were net Short on SET50 index future by 2,616 contracts.

 

Investment Theme: Eyes on FOMC meeting:
This week, one of the factors that affect the investment direction is the Federal Reserve meeting which will take place on June 19-20. Initially, we estimate that the FED will maintain interest rate at 2.25-2.50%. Maybank believes the FED is waiting to see the results of trade negotiations between the US and China at the G20 summit at the end of the month.

However, after Trump has continued pressuring FED Chair Powell to cut interest rates, subsequently, the latest announcement appears that the FED will begin to adjust its dovish perspective to interest rates cut in 2H19 period.

That was coupled with signs of economic slowdown (the manufacturing sector PMI, the inflation target is quite far from target, domestic consumption and others). Besides the FOMC meeting, we recommend investors follow Powell’s statement, which is expected to affect the Dot-plot in the direction of the interest rate. We believe that this signal of interest reduction should help alleviate the concerns of the inverted yield curve in the short term (3m / 10yrs) and make 2 / 10yrs come back to a certain extent.

In summary, Maybank estimates that this interest rate cut signal will be able to limit the Thai stock market downside in the short term. However, the major upside is still the result of trade negotiations.

Maybank estimates the SET index this week to swing in a range of 1,655-1690 points. It still recommends accumulate PTTEP (global plays) and speculate domestic plays stocks led by WORK, CPALL, BEM and S.

Big Issue
EXAT unveiled that the attorney is considering the draft contract, which is in accordance with the prosecution of disputes between EXAT and BEM. Maybank cuts earnings estimation and target price of IVL.

 

Stock Pick and Trading Idea
TPCH: BUY, TP THB16.60. Within the next 4 to 24 months the company will see important developments from its COD with the production capacity increasing from 53 to 108MW. As a result, earnings should grow to THB1.1b in FY2021 from THB354m currently.

This should be driven by 1) 3 FiT biomass power plants in the southern Thailand, a total of 24.7MW. 2) One large Biomass power plant with Adder in Pattani province, winning PPA contract in 2017 and 3) 8MW WTE power plant in Nonthaburi, to sign contract on July 17.

 

Technical View
Despite uptrend, likely to correct in near term: The SET index gained and stuck at the resistance of the ascending triangle at 1675 for the third time. It failed to breakout. This was coupled with the modified stochastic entering the overbought zone. From this situation, we find that even though the main trend remains uptrend, the index has a chance to correct in the near term. So we still recommend taking profit at the resistances 1675 and 1690. In the short to mid term, if it corrects and holds above 1653 (EMA200Day), this means it has a chance to retrace and wait for a breakout of the triangle.

 

Investment Strategy
1) With stocks, if rebounds, take profit at resistance 1675 and 1690. But if dips below 1670, gradually lock profit.
2) Without stocks, if weakens to test the support 1660, accumulate stocks.

 

Maybank sets a support line at 1653 points and 1660 points while setting a resistance line at 1690 and 1700 points

 

Keep an Eye On
1) OPEC meeting June 25-26.
2) G20 Summit June 28-29.
3) Government forming should complete within the next few weeks.

 

Technical Stocks
1) CKP (6.50-6.60, TP 6.90//7.10, Cut 6.40)
2) BTS (11.30-11.60, TP 12.50//13.00, Cut 11.00)