Daily Strategy for Investors on March 13, 2020

Asia Wealth Securities (AWS) released an analysis for the trading session on March 13, 2020, indicating the essential events in the stock market as follows:

 

Investment Ideas:

1) The Dow stock market dropped by 2,352.60 points (-9.99%). WTI crude oil price was down by USD1.48 (-4.5%) and gold price dropped by USD52 (-3.2%).

2) The VIX Index has increased to reflect investors’ concerns about the stock market. The latest VIX Index was at 75.71 points, up by 21.57 points (+40.0%), while the S&P500 VIX Futures this morning (8.05 a.m.) continued to increase. This was not a positive response to the Fed’s announcement of more than USD1.0tn into bank system while also increasing the type of securities for Fed bond purchases to reduce the impact of COVID-19 pandemic.

3) Futures and Commodity this morning (8.05 a.m.) Dow Future and the price of gold continued to decline while WTI crude oil prices recovered slightly.

4) US announced suspension of travel from European countries to the US, we see a negative factor for the overall economy and oil demand, especially the demand for jet fuel that is expected to affect around 180,000-200,000 barrels per day (There are approximately 400 daily flights between Europe and the US.)  

5) The European Central Bank (ECB) has agreed to keep the policy rate unchanged with the refinance rate at 0%, while the deposit interest rate of commercial banks deposited with the ECB remained at -0.50%, and the lending rate was maintained at the level of 0.25% as ECB considered the inflation rate as a deciding factor. If inflation rate approaches the target of the ECB set at 2%, there will be a review of the interest rate adjustment again.

6) Situation of the COVID-19 virus still spreads heavily outside of China. Yesterday  (12 Mar), the number of people infected increased to more than 130,000 cases with almost 5,000 deaths, while the number of people infected outside China continues to increase, especially in European countries such as Italy, Spain, France and Germany, as well as Iran, South Korea and the US. Meanwhile, the number of deaths is still increasing in Italy and Iran.

7) SET was suspended from circuit breaker in the afternoon yesterday (12 March) for the first time in 11 years and for the 4th time since the stock market in 1975. 

8) Circuit Breaker which occurred 3 times before – 1st time (19 Dec 2006), the Bank of Thailand in the period when Mr. Pridiyathorn Devakula was Deputy Prime Minister and the Minister of Finance announced the adoption of 30% reserve measures for foreign currencies to prevent speculation in Thai baht. From this point, the SET Index dropped by 142.63 points for the second time (10 Oct 2008), concerns over the financial crisis in the US (Subprime Crisis), and the third time (27 Oct 2008) from the economy as a result of ongoing problems from the Subprime Crisis.

 

What is Thai stock market after the circuit breaker? – According to AWS studies, the short and medium-term SET index has increased, with the SET Index increasing by 10.3%, 2.1% and 7.3% on average for 1 week, 1 month and 3 months, respectively, after circuit breaker occurred, while medium-long term rose by 15.3% in 6 months and increased 59.7% in 1 year after circuit breaker.

 

Today, AWS expects the SET to be within the range of 1,041- 1,132 points (with support at 1,078 1,041 and 986 points and resistance levels at 1,132 1,169 and 1,224 points).

 

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, AWS chooses CPF (TP Bt33.00). 

4) Interest rates cut. AWS chooses ORI (TP Bt9.00), 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.8.9%), QH (Div.Yld. 7.5%) TISCO (Div.Yld. 6.1%) BAFS (Div.Yld. 4.1%) and RATCH (Div.Yld. 4.1%).