Daily Strategy for Investors on March 6, 2020

Asia Wealth Securities (AWS) released an analysis for the trading session on March 6, 2020, indicating the essential events in the stock market as follows:

Investment Ideas:

1) The Dow stock market dropped by 969.58 points (-3.58%). WTI crude oil prices fell by 88 cents (-1.9%) and gold price increased by USD25 (+1.52%).

2) Negative information of COVID-19 virus that came back to pressure on the US stock market (1) The latest worldwide of the number of people infected with COVID-19 virus (5 March) was 98,088 cases, and the number of deaths worldwide was 3,356, while the number in the US has increased to 159 cases and the deaths in the US were 11, and (2) the International Air Transport Association (IATA) expects the epidemic of COVID-19 virus will reduce the revenue of passenger aircraft business by USD0.63 – 1.13mn by 2020.

3) The market is not confident in the economic stimulus measures, including the financial easing measures of the central bank around the world that will be able to reduce the impact of COVID-19 virus situation.

4) AWS thinks the ECB may announce a monetary easing measure before the policy meeting scheduled on 12 March 2020. The market is expected to decrease by 10bps. This will cause the reserve interest rate of commercial banks deposited with the ECB (Deposit Facility Rate: DFR at -0.6% per year) (previously -0.5% per year).

5) Central banks of other countries in the region began to relax their monetary policy as well.

(1) The Philippines cut its policy interest rate by 0.25% to 3.75% per year.    

(2) Malaysia cut the policy interest rate 2 times by 0.25% each time to 2.50% per year.

(3)  Australia cut policy interest rates by 0.25% to 0.50% per year.

6) The Bank of Japan (BOJ) may increase the purchase of stock funds (ETF) and adjust to be more flexible in buying. BOJ chairman indicated that BOJ will closely monitor the development of COVID-19 to maintain stability of the financial market and support liquidity through money market transactions and financial asset acquisition. The annual purchase of ETFs is at 6tn yen. The purchase of ETF should be more flexible, especially during the period when the Japanese stock market dropped sharply.

7) The OPEC meeting did not agree. The latest data indicates that Saudi Arabia proposed OPEC and its allies to reduce production capacity from the original resolution by another 1.0 – 1.5 MBD in the 2Q20 period (market expected 0.6 – 1.0 MBD) and reduce production capacity to 2.1 MBD until the end of 2020, but Russia proposed to reduce 1.7 MBD according to the original resolution to 2Q20 only.  

8) The Economic Cabinet will consider the stimulus measures today (6 March), which are (1) measures to distribute Bt1,000-2,000 to low-income people (2) measures to help the tourism sector (Hotel business and aviation business) and (3) measures to increase the amount of tax deduction though SSF.  

9) The MPC meeting on 25 March 2020 is more likely that the Bank of Thailand will cut the interest rate by another 0.25% to 0.75% (formerly 1.0%).

AWS expects the SET today to be in range of 1,380 – 1,402 points with support at 1,385 1,380 and 1,368 points and resistance at 1,396 1,402 and 1,414 points.

CHG – AWS recommends “BUY” with a target price of Bt2.80. The situation of COVID-19 affects the earnings slightly, while there are supporting factors. Hence, we believe that the FY2020 earnings might grow by 12%YoY, making CHG still attractive for investment.

Theme Investment:

1) Accelerate the disbursement of the government budget in 2020. AWS chooses CK (TP Bt22.00), SEAFCO (TP Bt7.30), WHA (TP Bt4.40), and KKP (TP Bt80.00). 

2) Government stimulus measure, AWS favours AOT (TP Bt79.00), CPALL (TP Bt85.00), BEM (TP Bt12.50) and HMPRO (TP Bt19.00). 

3) Global trade has eased and Thai baht depreciates. AWS chooses HANA (TP Bt39.00), TU (TP Bt18.40), and CPF (TP Bt33.00). 

4) Interest rates cut. AWS chooses ORI (TP Bt10.00), SPALI (TP Bt20.00), MTC (TP Bt73.00), KKP (TP Bt80.00), and TISCO  (TP Bt112.00). 

5) High Dividend, AWS chooses KKP (Div.Yld.8.7%), TISCO (Div.Yld.7.8%), INTUCH (Div.Yld.5.7%) and RATCH (Div.Yld.4.1%).