Maybank Kim Eng: Daily Strategy for Investors on March 6, 2019

Maybank Kim Eng Securities has made an analysis of the trading session of March 5, 2019, saying that SET moved in a narrow range driven by buying pressure on TOP and PTTEP. A technically rebound was seen on VGI while media stocks like WORK and BEC were bought again. The index closed at 1,639 points (+3.7 points) with a trading value of THB 41 billion, down from THB 45 billion on March 4, 2019.

Foreign investors continued to net sell Thai shares for a seventh day by THB 1.7 billion while institutions switched to net buy by THB 911 million. There were net short on SET50 index future by 1,619 contracts.

Investment Theme
SET target cut to 1,730 points for this year, still positive for investment: A wrap up of 4Q18 earnings results, the overall earnings were significantly weaker-than-expected (-40% YoY) pressured the market EPS for 2018 to weaken to about 97.7x.

Following the annual analyst meeting throughout 1-3 weeks ago, Maybank and other analysts start to adjust the various sectors’ profit estimates led by the energy sector (-7.8%), the petrochemical (-8.8%) and the banking (-5.2%). As a result, the market EPS in 2019 has been continuously reduced. This is one of the main reasons that Maybank has adjusted the SET index target this year from 1,750 points to 1,730 points on the assumption + 0.5S.D at the PER of 15.2x and using EPS19 at 113.5x.

The sectors that Maybank has a positive view on include retail, transports and hospitals should post earnings higher than consensus for this year. If evaluated by the earnings yield gap (%) method, at the same target area at 1,730 points, equivalent to 4.06%, vs the average value of the past 9 years, Maybank sees it as an appropriate level when considering 3 investment factors for this year.

Maybank has a negative outlook for global political factors. (US, China, Middle East), but neutral on economic factors (Threats to exports, while investment and consumption are still growing), positive for financial factors (expect FED, ECB will reduce Hawkish tone).

The SET in March should swing in a range of 1620-1680 points +/-. The market is expected high volatility in March due to political factors both domestic and global. Maybank recommends to hold cash no less than 40% and focus on power plant (EGCO) mass transit (BEM), tourism (SPA), retail (CPALL) and PTTEP is a global play stock.

Technical View
If SET Index holds above 1630 points, it is likely to swing sideways in a range of 1630-1660. The SET index started to show a sign of a brief rebound driven by buying pressure on big caps in all sectors. As a result, the index managed to hold above the key support at 1630 points with the modified stochastic indicator bouncing up from the support zone.

For the mid-term, the index is likely to swing sideways in a range of 1630-1660 points. If it gains, Maybank recommends selling stocks to reduce portfolio at resistances as previously recommended as the trend is sideways.

Investment Strategy
1) Investors with stocks, if SET Index holds above 1630 points, rebound trading for short term and take profit at resistance. But if the index dips below 1630 points, Maybank recommends to lock profit or stop loss.
2) Without stocks, it is recommended to wait to buy stocks at support 1630-1635 points for a brief rebound trading, and sell at resistance.

Maybank sets a support line at 1615 points and 1630 points, while setting a resistance line at 1645 points and 1655 points.