Daily Strategy for Investors on March 19, 2019

Maybank Kim Eng Securities has made an analysis of the trading session of March 18, 2019, stating that SET yesterday experienced a continued selloff, driven by strong selling pressure on big caps like CPALL, AOT and global plays stocks like KCE, PTT and IVL.

The index closed at 1,617.5 points (-8.0 points) with a trading value of THB 38 billion, down from THB 49 billion the previous day. Foreign investors net sold Thai shares by THB 1 billion, institutional investors net bought by THB 177 million. There were net long on SET50 index future by 1,494 contracts.

 

Investment Theme
European Union leaders say if Theresa May’s Brexit deal is rejected again, a clearer plan must be put forward. The UK is seeking a three-month extension to the current March 29 deadline in order to come to an agreement. EU leaders on Friday were seeking answers from Britain before they consider delaying the UK’s scheduled exit date from the European Union. Legally, Britain will exit from the bloc on March 29 unless EU leaders unanimously grant Britain an extension – an issue that is likely to dominate an EU summit in Brussels next week.

Initially, Maybank believes this issue may have a limited impact on the capital market in the short term. However, it may affect business like exports (Thailand and Europe accounted for about 9% of trade after the United States and China). Currently, Thailand’s main products export to Europe are electronic components, automobiles and gems. Another factor to be followed is the import quota from Thailand after Brexit. For long term impact, it is the confidence over the EU’s economy and bargaining power which may decline. Moreover, will this Brexit deal lead to other countries to follow?

 

March Investment Theme
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. 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
Airports of Thailand postpones duty-free auction to address monopoly concerns.

 

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

Gradually accumulate BCP, TP ฿39.0/share. Regarding the news on Exxon, the third-biggest refinery in the US, with 560.5 KBD, (half of all Thailand’s refineries) suffered a fire Saturday near Houston, this may boost the refining margin to increase in a short term.

 

Technical View
SET dips below 1623, sideways’ low, continue sliding in a downtrend. The SET index continued falling for three days in a row, driven by strong selling pressure on big caps of all sectors. This is coupled with the MACD indicator remains under the signal line, meaning a negative signal. As a result, the major trend has switched from sideways to downtrend again. In the near term, the index may fall down to test the key support at 1600. The index should stop at such level, otherwise, the downside will open wider and it may continue to slide to test the previous low at 1545.

 

Investment Strategy:
1) Investors with stocks, If dips below 1623, stop loss as previously recommended. If rebounds intraday, sell stocks to reduce portfolio at resistances. But if dips below low 1612, stop loss.
2) Without stocks, Wait to see the trend at next supports until it stops moving down or strongly rebounds.

 

Maybank sets a support line at 1580 points and 1600 points, while setting a resistance line at  1625 points and 1635 points.

 

Keep an eye on
1) Fed meeting on Mar 19-20.
2) Trump to meet Xi Jinping to end the trade dispute.
3) BOT meeting on Mar 20.
4) Thai election on March 24.