Daily Strategy for Investors on June 22, 2020

Asia Wealth Securities (AWS) released an analysis for the trading session on June 22, 2020, indicating the essential events in the stock market as follows:

 

Investment Ideas:

Investment Overview Today – The stock market is still in a volatile direction from the same risks (COVID-19 in foreign countries and market valuation), only the world trade issue started with good news from China returning to import agricultural products from the U.S. according to the first trade agreement issue. The BoT requests commercial banks to stop paying interim dividends. AWS sees that it won’t have much impact on the stock market as the share prices of the banking sector will respond to the short-term negative, but it will be compensated by other interesting stock dividends such as DIF, INTUCH, ORI, and shares in the power generation businesses. Investment strategy during high volatile markets, AWS still chooses to invest in defensive stocks in the theme investment such as DCA and SSFx.  

 

AWS expects the BoT to maintain the policy interest rate at 0.5% at the meeting on  24 June – AWS weighs that the MPC on 24 June will maintain the policy interest rate at 0.5% which is partly due to the MPC cutting the policy interest rate at the previous meeting. After the government began to ease the lockdown measures and the use of fiscal policy to stimulate the economy a lot, including the risk from COVID-19 in the country that has been resolved. In 2020, there are still 4 MPC meetings. AWS expects the BoT to have a chance to cut interest rates once more at the rate of 0.25% (to 0.25%), under the assumption, there is no second wave of COVID-19 pandemic in the country.

 

BoT requests commercial banks to stop paying “Interim Dividend” and “No Stock Repurchase”. AWS looks that it will impact the short-term investment sentiment in the banking sector – AWS has divided into 3 cases (1) Measures to stop repurchasing shares; AWS believes that there is no effect. (2) Request to suspend interim dividend; AWS expects that the impact will be quite limited. Since the interim dividend yield is not high, the interim dividend in 2019 has 2% average return while the banking sector earnings forecast for 2020 still has downside due to risk factors and high uncertainty, causing us to believe that investors don’t expect much dividends. AWS estimates that the impact of this issue will only affect the short-term investment sentiment and  (3) the BoT prepares a capital management plan for the next 1-3 years. AWS agrees and likes this measure. Such a measure is considered an important role of the BoT in implementing the said policy, while AWS weighs the measure is just a review of the financial status of each bank which does not give a negative signal to the economic overview.

 

Short-term global trade issues, but still have to closely monitor – After the news from foreign media about the Chinese plan to import the U.S. agricultural products, from soybeans to corn and ethanol according to the first phase agreement stating that China will buy agricultural products from the U.S. in the amount of USD36.5bn which up from USD24bn in 2017 (before the trade war), while 4M20, China bought agricultural products from the U.S. for just USD4.65bn (accounting for 13% of the deal) and down 40% from 4M17.

 

Technical view – This week, AWS expects the SET index this week to move within the range of 1,357-1,406 points, and today, AWS expects the SET Index to move in a range of 1,361 – 1,384 points (support at 1,366 1,361 and 1,354 points and resistance at 1,372 1,377 and 1,384 points). The recommended stocks are CBG, EA, PSH, ORI and OSP .

 

Theme Investment

1)Accelerate the disbursement of government investment budget – CK, STEC, SEAFCO, PYLON, and TASCO

2)Stocks that benefit from entering the rainy season – BCPG, BGRIM, CKP, GPSC, and EASTW

3)Stocks that benefit from government measure – ADVANC, BTS, BEM, CPF, CPALL, BJC, CRC, CPN, PLANB, HMPRO, OSP, and CBG

4)Long-term cumulative shares (DCA) – ADVANC, AOT, BDMS, BEM, CPALL, DIF, and HMPRO

5)SSFx target stocks – PTT, PTTEP, BJC, CPALL, AOT, GULF, EGCO, INTUCH, ADVANC, BAM, and BDMS