Daily Strategy for Investors on June 26, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on June 26, 2019, stating that he SET on Tuesday gained, driven by strong buying pressure on petchem stocks IVL, PTTGC, mass transit BEM and BTS, including several mid caps like S, CBG, SABINA, and STPI.
The index closed at 1,721.3 points (+5.3 points) with a trading value of THB65 billion (THB51 billion the previous day). Foreign investors continued to net buy Thai shares by THB2.35 billion. Institutional investors net sold by THB1.69 billion. There were net Short on SET50 index future by 5,351 contracts.

Investment Theme: Market correction is likely
Maybank expects the new cabinet to officially kick off in the middle of July. In the near term, Maybank may see short term economic stimulus packages rolling out such as minimum wage hike, increasing the limit for state welfare card and approval of several infrastructure projects.

Initially, Maybank has a mild positive view on these issues. For minimum wage hike issue, Maybank found that every THB10 hike, it affects the earnings of retail and construction sectors under our coverage by about 0.6-3.8%. Another key factor to watch out today is the MPC meeting as Maybank believes that the Thai GDP could be revised down from 3.8% (Maybank estimates GDP at 3.2%).

However, keep an eye on the BOT governor statement on firstly, interest rate direction, following several banks around the globe signaling more dovish. Secondly, stronger Thai Baht, strongest in 6 years. Thirdly, the inflation target, after the government prepares to raise minimum wage. Initially, Maybank forecasts that BOT should maintain the interest rate at 1.75% awaiting the G20 summit. There will not be measure to hold the Baht in the near term.

For the overall picture of the SET, Maybank forecasts that the global stock markets may face a market correction during 1-3 days prior to the G20 summit.
Investors are recommended halting investment and hold stocks to wait for the results.

Investment Theme
At the current level, the SET trades at PER19 at 16.2x, close to the past 9 years average +1SD. Maybank believes SET should return to swing in a range of 1SD or at around 1690-1730 points. Maybank estimates the large-cap stocks may enter a correction period. This gives it a chance to speculate mid-caps, recommend “HOLD” PTTEP, BEM, CPALL and speculate TRUE, S and TPCH.

Big Issue
PM Prayut to attend the G20 Summit in Japan.

Stock Pick and Trading Idea
HMPRO: Accumulate, (Mid2020) target price raised to THB18.20. Maybank expects 2Q19 earnings to grow by 13%YoY to THB1.48 billion, driven by SSSG (%) at 3.5% (from 2.5% in 1Q19). Earnings outlook should continue growing strong in 2H19 and make an all-time high in 4Q19 thanks to the opening of one Homepro store, 3-4 HomePro S and 2 MegaHome, coupled with expanding margin (%) from house brand products growing by 30-35%.

Technical View
SET manages above 1710, eyes on breakout trading: The SET index was driven by buying pressure on telco, petchem and property sectors throughout the day. As a result, the index is likely to break the resistance level of the uptrend channel intraday. However, it failed to break out the resistance of the uptrend at the end of the day. So, if the index weakens but manages to hold above 1715, it gives a chance for trading on anticipation for the breakout of the resistance level of the big uptrend channel. If it surpasses it, the next resistances are 1740 and 1760. But if it dips below 1715, lock the profit.

Investment Strategy
1) With stocks, if holds above 1715, hold stocks and gradually take profit at 1740 and 1760. But if dips below 1715, lock profit.
2) Without stocks, if weakens but holds above 1715, accumulate stocks for rebound trading.
Maybank sets a support line at 1700 points and 1715 points while setting a resistance line at 1740 and 1760 points

Keep an Eye On
1) Trump may intensify sanctions on Iran. US reports GDP growth on June 27.
2) G20 Summit on June 28-29.
3) MPC meeting on June 26. Constitutional Court to rule on MP holding media shares or not?