Daily Strategy for Investors on April 5, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on April 5, 2019, stating that SET yesterday swung in a narrow range. Strong buying pressure was on OSP while power plant stocks were heavily sold led by GPSC, EGCO and GULF. However, BPP and RATCH were bought.

The index closed at 1,644.2 points (-4.8 points) with a trading value of THB 34 billion, (THB 44 billion the previous day). Foreign investors net sold Thai shares by THB 415 million, institutional investors net sold by THB 681 million. There were net short on SET50 index future by 6,659 contracts.

 

Investment Theme: SET to swing in 1630/45 range prior to long public holidays
Thailand is approaching its long holiday season. Maybank expects the SET should swing in a range of 1630-45 points, with thin trading value. Last night, after the meeting between Trump and Liu He, the US president said it may take about 4-6 weeks in trade negotiations before preparing to sign the agreement. After the meeting in Washington, both sides have positive comments on the progress which is in line with our view.

Maybank expects the outcome of the negotiations would not get worse and do not think the US would increase the tariff by 25% due to 1) tariff hike did not help the US to reduce its trade deficit, instead, it jumped by 10% YoY, the highest in 10 years at USD890b and affect the industry in a wide range. 2)Trump’s approval rating in Republican-dominated states continued to decline. And 3) Maybank began to see a positive signal from the Chinese side as it is set to buy goods from the US for the long term. However, to take more 4-6 weeks for trade negotiations may force the market to swing and the upside is limited as well.

 

2Q19 Investment Theme
The SET in April should swing in the uptrend channel with a range of 1,630-1,680 points. Recommend investors holding cash not less than 40%. BUY global palys stocks like PTTEP, BCP and HOLD BEM and CPALL.

 

Big Issue
Global The UTCC forecasts GDP growth of 3.5-3.8% this year, (previously expected 4%), the consumer confidence index fell to 80.6 last month after rising to 82 in February. EC orders 6 election reruns. Indian central bank cuts rates to boost growth by 0.25% to 6.0%.

 

Stock Pick & Trading Idea
1) Trading Buy CK at the target price of ฿31.00/share. Maybank assesses that if CP group wins the concession of the high-speed rail linking 3 airports, CK is likely to partly gain the civil works worth a total THB 150 billion. It has upside risk from the construction works of BEM after it renews concession of the expressway and the Orange Line. The results will announce in May.

2) Gradually accumulate stocks with 2 themes; sector expected to face limited impact from political factors led by retail BJC with a target price at ฿65.00/share and tourism SPA with a target price at ฿15.80/share and sectors with limited downside, recovering margin with attractive valuation led by BCP with a target price at ฿39.00/share and BCH with a target price at ฿20.00/share.

 

Technical View: Likely to weaken to test 1630, if holds, meaning it forms the right shoulder of reversal H&S
The SET index dropped driven by selling pressure on the energy, property and retail sectors. Maybank sees that it is weakening to test the support 1630 which is a support of the uptrend line. If it manages to hold, meaning it is forming the right shoulder of the reversal head and shoulders pattern. So, if it weakens, it is a chance to accumulate stocks at the supports 1640 and 1630. But if it rebounds, take profit at resistance for the next trading cycle.

 

Investment Strategy:
1) Investors with stocks, if rebounds intraday, consider selling pressure at resistance. If it dips below 1630, stop loss or lock profit.
2) Without stocks, gradually buy stocks if weakens intraday to supports 1640 and 1630 for a rebound trading at 1650 and 1656.

 

Maybank sets a support line at 1630 points and 1640 points, while setting a resistance line at  1656 points and 1675 points.

 

Keep an Eye on
1) Alternative energy operators to ask Administrative Court to consider PDP plan.