Daily Strategy for Investors on June 27, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on June 27, 2019, stating that he SET on Wednesday returned to swing in a range again driven by selling pressure on big caps like PTTEP, AOT, and KBANK. However, strong buying pressure was on power plant stocks like BCPG, GULF, RATCH, GPSC, and BGRIM.
The index closed at 1,722.2 points (+0.8 points) with a trading value of THB64 billion (THB65 billion the previous day). Foreign investors continued to net buy Thai shares by THB5b. Institutional investors net sold by THB5.7b. There were net Short on SET50 index future by 13,558 contracts.

Investment Theme: FED banks on US-China trade talks this weekend
According to Fed chair Jerome Powell speech last night, the overall is slightly out of the market expectations as he maintained neutral to rates cut. He used the phrase “Wait and see approach”. While the St Louis Fed Bullard said he doesn’t see the need for a half-point rate cut. However, the US 2-year bond yield remains at the lowest at 1.73% (the lowest in 19 months).

Maybank has a neutral view on this issue and believes that FED may wait for the results of the US-China trade talks this weekend.
Initially, Maybank maintains our neutral view on this issue as well. As Maybank estimates that the US should postpone the tariff hike on USD300 billion of imported goods from China further to avoid tech war. Meanwhile, FED is likely to cut the policy interest rate once in 2H19.

The MPC meeting yesterday has agreed to hold the interest rate at 1.75% as expected while cutting GDP forecast to 3.3% from 3.8% (Maybank expects 3.2%), driven by 0% exports (3.0% previously) while consumption growth remains at 3.8%.         

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
The MPC holds interest rate at 1.75%, cut GDP growth forecast for 2019/20 to 3.3% and 3.7% respectively.

Stock Pick and Trading Idea
S : Accumulate, target price of THB4.20 / share. After investing and restructuring the business for more than a few years, Maybank views that the company is entering a growth stage and this is a good time to gradually accumulate S shares. Maybank expects earnings this year to grow by 160% to THB1.6 billion from delivery of 2 large projects and continue growing by 30% in 2020 due to revenue recognition from JV.  Moreover, in 2H19, S prepares to spin off over 39 hotels (SHR) to be listed on the stock exchange, which will unlock important value and continue to invest in the future and relax the financial position as D/E decreases to 1.6x.

Technical View
If holds above 1715, likely breakout 1725, to test 1740: The SET index swung sideways all day before strong buying pressure took place on power plant stocks in the afternoon. As a result, the index rebounded to close at the resistance level of the uptrend channel at 1725. With strong buying pressure in the afternoon for two consecutive days, Maybank believes the index may manage to hold above 1715. This gives a chance for trading on anticipation for the breakout of the big uptrend channel. If it surpasses such level, 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 the 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.
2) US reports GDP growth on June 27.
3) G20 Summit in Japan on June 28-29.