Daily Strategy for Investors on January 20, 2020

Maybank Kim Eng (Maybank) released an analysis for the trading session on January 20, 2020, indicating the essential events in the stock market as follows:

The SET on Friday gained aligning with the regional markets, driven by positive foreign factors as tensions easing. Strong buying pressure was on BAM, KBANK, ADVANC and electronics due to weakened Thai baht. The market closed at 1,600.48 (+4.6 points) with a trading value of ฿61b (฿62b the previous day).  

Foreign investors net sold Thai shares by ฿1.49b. Institutional investors net bought by ฿2.596b. There were net Long on SET50 Index Futures by 10,084 contracts.

 

Stock Picks & Trading Idea

CPF (TP raised to ฿36 from ฿34): Maybank expects 4Q19 net profit of ฿4.527b (-25% QoQ, +170% YoY) as CPF should record gain from changes in fair value of biological assets of ฿1.5b. Excluding this item, normalised earnings should be ฿3.037b (-6% QoQ) on seasonal,  but jumped +80% YoY from gross margin expected to rise by +210bps YoY to 14.7% thanks to average swine prices in Vietnam jumping 33% YoY.

 

Investment Theme

Thai politics, oil prices and banking earnings announcement, should SET breakout 1600: Things to watch this week remain important both internal and external, led by 1) Libya and Iraq tension may drive global crude oil prices up, 2) Senate prepares to consider the 2020 Budget Act today (Jan 20) which is a key process affecting the progress of several megaprojects which should gradually disburse in Feb, 3) 4Q19 earnings results. Over the weekend large banks reported not so good earnings, which may drag the SET index down. 4) Domestic and overseas politics must be closely watched. On Jan 21, the Constitutional Court will rule on the Future Forward Party case. This may trigger the political turmoil. 

For overseas factor, the US Senate prepares to consider the impeachment of the US president Donald Trump. However, Maybank believes this issue is not so hot as the Republican (Trump side) has over a half of votes in the House. To get the president impeached, it requires  two thirds of vote. So this case should not be easy. All in all, should the SET index manage to hold above 1600 points, it should benefit from these mentioned factors.    

Today’s SET’s support level is at 1590 and resistance at 1605. Maybank recommends accumulate strong earnings prospects stocks (CPF, BDMS, AOT), speculate PTTEP on Libya& Iraq tensions, speculate property (AP, SPALI) on easing LTV, accumulate high dividend stocks (TISCO, LH).

 

Big Issue

1) Libya political turmoil may reduce its oil production by 700k bbl or 60-70% of its exports.

2) Baker Hughes BKR on Friday reported that the number of active U.S. rigs drilling for oil rose by 14 to 673 this week. That followed declines for oil rigs in each of the past three weeks.

 

Eyes on

Mid-Jan: 4Q19 earnings results announce

20-21 Jan: BOJ meeting

21 Jan: Court to rule on Future Forward Party case

22 Jan: US existing home sales (Dec)

22 Jan: Exports report (Dec)

23 Jan: ECB meeting

24 Jan: Eurozone PMI & US PMI manufacturing and Services (Jan)

      

Maybank has set a support level at 1570/1590 and a resistance level at 1610/1620.