Daily Strategy for Investors on March 15, 2019

Maybank Kim Eng Securities has made an analysis of the trading session of March 14, 2019, stating that SET moved in a tight range driven by strong selling pressure on the global plays stocks led by PTTGC, TOP and PTTEP. Heavily profit taking was spotted on SUPER following SEC nodding for its infrastructure fund establishment.

The index closed at 1,635.8 points (-3.7 points) with a trading value of THB 38 billion, down from THB 45 billion the previous day. Foreign investors switched to net sell Thai shares by THB 1.96 billion. Institutional investors continued to net buy by THB 1.9 billion. There were net short on SET50 index future by 20,451 contracts.

 

Trade War
Trade war should not get worse: The “America First” vs Chinese’s “Made in China 2025” policies is one of the reasons that caused the US and China trade war dispute over the trade barriers through the import tax hike. Over the past six months, the economies worldwide are getting affected. As a result, many organizations have revised their global economic growth target to 2.9-3.5% this year.

Maybank estimates the impact of the trade war will continue to pressure economic figures in 1Q19 (Thai exports growth is likely to be negative in 1Q19). This issue will continue to pressure the economy and the stock market until the expected negotiations in April.

Initially, Maybank has a neutral view on this matter and anticipating the base case result, which means that Trump will cancel the tax increase of 25% and / or likely to reduce the current limit, partly supported by 1) tax increases, not only failed to reduce the US trade deficit, instead it increased to 10% YoY, the highest in 10 years. 2) Trump’s Approval Rating in the Republican state began to decline, such as Georgia, Alabama and 3) China began to soften its gesture by preparing for the MOU. Given these aforementioned reasons, Maybank expects this negotiation result to be less severe. However, Maybank suggests investors follow that the results will be good for the best case.

 

Investment Theme
The SET in March should swing in a range of 1620-1680 points +/-. The market is expected a 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.

 

Big Issues
1) Abe rules out fourth term as head of Japan’s LDP amid talk of tweaking rules to allow another run.
2) UK lawmakers vote to ask EU leaders for Brexit deadline delay to June 30.
3) The US 10 years bond yield rose to 2.63%.

Technical View
Only a weak rebound, if rebounds intraday, reduce portfolios: The SET index sharply gained, driven by strong buying pressure on transport, conmat and energy stocks. But the strong selling pressure on retail, telecom and hospitals stocks has pressured the index. As a result, a rebound momentum from the previous day has weakened. In the near term, the index is likely to swing sideways in a range of 1630-1660. If rebounds intraday, take profit at resistances 1645 and 1660. The trend may shift to uptrend again once the index breaks the resistance 1660 (EMA200Day).

 

Investment Strategy
1) Investors with stocks, if SET rebounds, take profit at resistances 1645 and 1660.
2) Without stocks, if SET  weakens but holds above the supports 1630-1635, accumulate buy stocks for trading and profit taking at resistance zone. But if SET dips below 1630, stop loss and stop speculating immediately.

 

Maybank sets a support line at 1623 points and 1630 points, while setting a resistance line at  1645 points and 1660 points.

 

Keep an eye on
1)  Trump to meet Xi Jinping on trade war talks on March 27.
2) Progress on high-speed trains linking three airports bidding on March 19.
3) Thai election on March 24.