Daily Strategy for Investors on January 21, 2020

Maybank Kim Eng (Maybank) released an analysis for the trading session on January 21, 2020, indicating the essential events in the stock market as follows:

 

The SET yesterday fell, driven by strong selling pressure on banking stocks (SCB, TMB) in response to negative sentiment on weaker than expected 4Q19 earnings results. The market closed at 1,589.11 (-11 points) with a trading value of ฿57b (฿61b the previous day).  

Foreign investors net sold Thai shares by ฿222m. Institutional investors net sold by ฿4.895b. There were net Short on SET50 Index Futures by 27,475 contracts.

 

Stock Picks & Trading Idea

OSP (TP ฿50): The company has a strong business base, in terms of the complete production and distribution network as well as a diverse portfolio of products with well-known brand names. Profit should be driven by both sales and higher margins from capacity expansion, market expansion to CLMV and effective cost reductions. Maybank estimates the average annual growth rate (CAGR) of 12% in the next 3 years.

 

Investment Theme

Constitutional Court to rule on Future Forward Party case today: Pressure from banking sector reporting weaker than expected 4Q19 earnings results, including weaker than expected loan growth, narrower NIM, higher provisions and accelerating NPL formation, indicating that asset quality may still be a factor to pressure the banking performance in the future. 

Therefore Maybank suggests investors be more careful on the remaining banks earnings results announcement which Maybank believes they should come out the same. Moreover, domestic factor that should be closely monitor today is the Constitutional Court to rule on the Future Forward Party case. Today’s ruling involves allegations made by Natthaporn Toprayoon, a lawyer and former adviser to the chief ombudsman, who sought the FFP’s dissolution last year for violating Section 49 of the constitution which prohibits actions that undermine the monarchy. This may trigger the political turmoil. 

For overseas factor, the US Senate prepares to consider the impeachment of the US president Donald Trump. However, Maybank believes this issue is not as hot as the Republican (Trump side) has over a half of votes in the House. To get the president impeached, it requires  two thirds of vote. So this case should not be easy.  

Today’s SET’s support level is at 1590 and resistance at 1605. Maybank recommends accumulate strong earnings prospects stocks (OSP, CPF, BDMS, AOT) and accumulate high dividend stocks (TISCO, LH, TTW).

 

Big Issue

1) China confirms human-to-human transmission of Wuhan virus as WHO announces emergency meet

 

Eyes on

Mid-Jan: 4Q19 earnings results announce

20-21 Jan: BOJ meeting

21 Jan: Constitutional Court to rule on Future Forward Party case

22 Jan: Exports report (Dec)

22 Jan: US existing home sales (Dec)

23 Jan: ECB meeting

24 Jan: Eurozone PMI & US PMI manufacturing and Services (Jan)

 

Maybank has set a support level at 1570/1580 and a resistance level at 1605/1620.