Daily Strategy for Investors on January 2, 2020

Maybank Kim Eng has made an analysis for the trading session on January 2, 2020, pointing out some of the must-know events in the equity market as follows:

 

The SET on Monday moved narrowly with a light trading volume ahead of New Year’s eve. The market closed at 1,579.8 (+1 point) with a trading value of THB29b (THB39b the previous day).

Foreign investors net sold Thai shares by THB1.325b. Institutional investors net bought by THB2.466b. There were net Short on SET50 Index Futures by 3,946 contracts.

 

Stock Picks & Trading Idea

MCS (TP THB11.50):  Maybank expects 4Q19 earnings to remain strong at THB162m (-19%QoQ, +25%YoY). The earnings for 2019 should be as high as THB550m, a jump of 32% YoY. The 2020 earnings outlook should continue growing thanks to a high backlog of 120k tonnes. Given a cheap valuation, MCS share trades at low P/E of 7.6x and 1.3x P/BV with high dividend yield of 6.6%.

 

Investment Theme

Entering the first month of 2020, Maybank expects the SET index to swing in a range of 1550-1620 points. External factors should be a driving force to boost the market. That includes progress in the US-China phase one trade talk deal that will be signed in Jan.

Recently, US President Trump revealed that he will sign the deal with China’s leader on Jan 15 in Washington and will continue the next round of trade talks. Maybank forecasts this should be positive sentiment to the global economic recovery. That is in line with the global crude oil prices that are likely to increase in response to demand that is likely to accelerate while the OPEC+ should begin to cut production further as agreed at the meeting in December.

 

However, internal factors may pressure the market. Maybank recommends keeping update on following issues: 1) The 2020 Budget Act with limit of THB3.2t to be considered on Jan 8-9. If the act passes, confidence on investment should recover, 2) the no-confidence debate on Jan 13-14, the debate will be after Jan 25, 3) The Constitutional Court says it will rule on whether to dissolve the Future Forward Party (FFP) on Jan 21 over allegations that it tried to overthrow the monarchy, in the latest challenge to its existence.

Today’s SET’s support level is at 1570 and resistance at 1590. Maybank recommends gradually accumulate strong earnings stocks (MCS, BDMS, PTTEP) and high dividend stocks (BBL, LH, TISCO).

 

Big Issue:
1) Trump Says He Will Sign Phase-One Trade Deal With China on Jan. 15 in Washington
2) People’s Bank of China to cut banks’ reserve ratio by 0.5 percentage points from January 6.

 

Eyes on:
2 Jan: China Caixin PMI Manufacturing for Dec
2 Jan: Europe PMI Manufacturing and Service for Dec
2 Jan: Thailand inflation for Dec
3 Jan: US ISM Manufacturing for Dec