Daily Strategy for Investors on March 18, 2019

Maybank Kim Eng Securities has made an analysis of the trading session of March 15, 2019, stating that SET index on Friday experienced a selloff, driven by strong selling pressure on big caps like CPALL, AOT, KBANK and MINT.

The index closed at 1,625.5 points (-10.3 points) with a trading value of THB 49 billion, up from THB 38 billion the previous day. Foreign investors net sold Thai shares by THB 2.4 billion, institutional investors net sold by THB 787 million. There were net long on SET50 index future by 418 contracts.

 

Investment Theme

The general election on March 24
This week, the stock market tends to move in a narrow range of 1,620 / 35 points +/-, with light trading value prior to the election on March 24. Two key factors to be followed. Maybank has a neutral view on the Thai election, a high chance of coalition government. Keep an eye on the number of votes in the lower house. If the opposition party has more than 251 seats in the House of Representatives, the stock market may fluctuate in the early stages from the uncertainties. And another key factor is the US Federal Reserve meeting on Mar 19-20.

 

Fed meeting
Maybank expects the FED to start easing monetary policies (reduce Hawkish). Keep an eye on the Dotplot, currently at 2.875% this year, as Maybank expects it to decrease. This means the US will raise interest rates less than twice this year and plans to end the balance sheet reduction from USD450b (reduce USD50b per month). If so, it is expected the dollar will weaken which is another factor limiting the downside of the capital market in the emerging markets.

 

March 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. Recommend hold cash no less than 40%. Focus on power plant (EGCO) mass transit (BEM), tourism (SPA), retail (CPALL) and PTTEP is a global play stock.

 

Big Issue
1) Thailand early voting kicks off.
2) Many organisations revised down global GDP growth forecast.

 

Stock Pick & Trading Idea
Gradually accumulate BEM as Maybank sees progress on renewal concession for expressway phase 2 in April as Maybank included in our estimates at a TP of ฿12.0/share. Technically, the key support is THB9.70.

Gradually accumulate BCP on anticipation of 84% YoY earnings growth, the highest of refineries stocks. Strong 1Q19 earnings growth QoQ from stock gain and will continue in 2Q19 due to recovery GRM from maintenance shutdown that will peak in May. As for 2H19, BCP is expected to gain positive results from diesel reserves prior to IMO requirement implemented in 2020. Valuation remains undemanding with a PE of 9.9x, PBV of 1.0x and a 5% dividend yield. Recommend “BUY“, TP-SOTP at ฿39/share.

 

Technical View
If dips below 1623, more downside, next support is 1600:  The SET index fell driven by strong selling pressure on big caps of all sectors leading it to slip through the uptrend line again. The next key support is 1623. If it dips below this level, the downside will open wider and it will confirm the triple top reversal pattern. The next support is 1600. So, if it dips below 1623, stop loss. If rebounds, take profit at resistance 1633 and 1645 to reduce portfolio and hold more cash.

 

Investment Strategy
1) Investors with stocks, if rebounds, take profit at resistances 1633 and 1645. If dips below 1623, stop loss.
2) Without stocks, wait and see at the support 1623, if dips, more downside. Wait to see the trend at next supports until it stops moving down or strongly rebounds.

 

Keep an eye on
1) Fed meeting on Mar 19-20.
2) Trump to meet Xi Jinping to end trade dispute.
3) Progress on high speed trains linking three airports bidding on March 19.
4) Thai election on March 24.