Daily Strategy for Investors on February 26, 2020

Maybank Kim Eng (Maybank) released an analysis for the trading session on February 26, 2020, indicating the essential events in the stock market as follows: 

Market Summary

1) The SET yesterday weakened in the morning session before closing in a positive terrain in the afternoon. The market remains fearful over COVID-19 outbreak out of China, expecting to hurt the global economy. The SET index closed at 1,439.1 (+3.5points) with a trading value of THB81b (THB76b the previous day).  

2) Foreign investors net sold Thai shares by THB1.256b. Institutional investors net bought by THB3.279b. There were net Long on SET50 Index Futures by 23,831 contracts.

Stock Picks & Trading Idea

TU (TP THB18.90) : 4Q19 earnings were in line but gross margin improved thanks to lower raw materials costs and better product mix. 1Q20 earnings outlook is likely to recover YoY due to weakening Thai baht QTD and low-priced tuna stocks.

Investment Theme

COVID-19 outbreak out of China: The short-term global stock market movements are still subject to the COVID-19 epidemic. Considering the number of infected cases around the world, it has risen to 80,000 with 2,700 deaths, while the number of cured cases increases continuously to 27,800 cases. If considered on a daily basis, we find that there are about 2,000-2,500 patients per day that have been cured, while new cases occur around 800-1,000 people per day. This is considered a better momentum that the number of cured cases per day is greater than the number of new cases. However, there is still a worrying problem: if considering cases of new infections in each country, it is found that China has new infections at a decreasing rate. This has reflected better public health control after the new hospital opens. But in some countries such as North Korea, Italy, Iran, numbers of infected cases are accelerating. This issue may be something that the market may still be concerned about. If the epidemic spread as widespread as it did in China, it may put pressure on the growth of the economy as a whole. Therefore, this would be an important factor for investors to closely monitor the spread of COVID-19 in risky countries outside of China.

Investment Strategy  

Maybank estimates the support level of the SET index today at 1420 and resistance at 1450. Use 20% of the capital to buy on weakness on stocks that can cope with high risk market condition (GULF, INTUCH, BTS, SAWAD, TU, RBF) and trading buy better than expected earnings stock like (GLOBAL).

Big Issue

Number of COVID-19 infected cases outside China is accelerating, especially in South Korea, Italy, Iran and Bahrain.    

Eyes on

24-27 Feb: No-confidence debate

26 Feb: US new home sales (Jan)

26 Feb: Thailand MPI (Jan)

27 Feb: US 4Q19 GDP (2nd), US durable goods purchase order (Jan)

28 Feb: US Confidence Index (Feb), Eurozone CPI (Feb)

MSCI rebalancing, closing price on 28 Feb

28 Feb: Jan Economic data report

Technical View

SET: Support : 1415/1430 / Resistance : 1450/1460