Daily Strategy for Investors on April 28, 2020

Maybank Kim Eng (Maybank) released an analysis for the trading session on March 24, 2020, indicating the essential events in the stock market as follows:

 

Market Summary

The SET yesterday gained positive expectations on the improved Covid-19 situation in Thailand. The SET index closed at 1,267.41 (+8.63 points) with a trading value of THB49b (THB69b the previous day).  

Foreign investors net sold Thai shares by THB669m. Institutional investors net bought by THB 68m. There were net Short on SET50 Index Futures by 3,895 contracts.

 

Investment Theme

Closer to 1300, the more caution is needed: At the moment the SET recovered more than +30% from its bottom at 969 points. Maybank believes it was due to 1) Positive development of the COVID-19 situation in Thailand, 2) expectations on easing measures in the next phase and 3) urgent and significant economic and fiscal stimulus measures. Maybank sees that all factors are helping to drive the Thai economy to have the opportunity to recover and move forward again. 

However, in the short term, the market may be confronted with negative factors such as 1) SET-listed companies’ weak earnings report, 2) poor economic data, 3) lowering the earnings estimate, resulting in short-term SET valuation getting tightened. These factors may lead to short-term corrections. 

The correction is expected in May which is in line with historical statistics that the market tends to correct during this month, with a probability of up to 80% in the past. However, if the correction occurs, Maybank doesn’t expect it to be as severe as in the past as the Thai economy is in the process of recovery and the SET has undergone major correction since the beginning of the year. Maybank assesses the key support of the SET at the 1,220, 1,200, 1,180 and the worst case at 1,150 points, which is considered the average cost of institutional investors to accumulate when rebounding in this round. 

So when the SET weakens, it is a time to gradually accumulate shares to capture a recovery in 2H20 to reach the target of the year-end SET at 1,380 points. Interesting sectors in case that the market corrects are divided into 2 groups: 1) 2H20 The Survival: PTTEP, TOP, CRC, BEM, RBF, CPN, BDMS, SCC, BAM and 2) 2021 The Survival: GULF, PTT, CPALL, AOT, ADVANC, BBL, GFPT, AWC, CHG, SAWAD, CENTEL.

 

Investment Strategy: The SET is expected to move sideways today, with support at 1,250 and resistance 1,280 points. Recommend using 20% of the portfolio to trading buy following stocks “BEM, HMPRO, SAWAD and CBG.”

With stocks: If the index manages to stay above 1275, keep holding stocks. But if dips below 1260, reduce the portfolio by locking profit.

Without stocks: Intraday trading, wait to buy at weakness around the first support 1245+/-. If dips below such level, wait and see at around 1200.

 

Big Issue

West Texas Intermediate for June delivery fell 24.56%, or USD4.16, to settle at USD12.78 per barrel on fears that worldwide storage will soon fill as the coronavirus pandemic continues to roil demand.

 

Eyes on

COVID-19 infected cases daily report

1Q20 earnings results

28 Apr: US Consumer Confidence Index (Apr)

29 Apr: US 1Q20 GDP

29 Apr: Industrial Production (Mar)

30 Apr: Thailand economic data report (Mar)     

30 Apr: China Manufacturing and Services PMI, EU 1Q20 GDP

Meetings: BOJ (27-28 Apr), FOMC (28-29 Apr), ECB (30 Apr)

 

Technical View

Support : 1245/1260 Resistance : 1275/1284

SET Index: Despite trading volume down, the index managed to hold. But if it dips below 1260, reduce the portfolio. The SET managed to hold in the range of the uptrend channel with the lowest trading volume in 11 trading days at THB49b. This translates into the market starting to hesitate and doubt the catalysts that are not strong enough to drive up the market. Today the resistance line is at 1275.