Daily Strategy for Investors on April 18, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on April 18, 2019, stating on SET yesterday sharply gained driven by buying pressure on financial stocks SAWAD, MTC and several mid caps BEAUTY, TKN, PRM, CBG and power plants EA.

The index closed at 1,673.2 points (+12.7 points) with a trading value of THB 52 billion, (THB 33 billion the previous day). Foreign investors continued to net sell Thai shares by THB 218 million, institutional investors net bought by THB 3.3 billion. There were net long on SET50 index future by 10,657 contracts.

 

Investment Theme: US trade deficit drops while China set to cancel import tariffs for agricultural products from the US

Since the US and China reported better than expected PMI manufacturing, the overall investment in the capital market has started to grow steadily. The US reported a trade deficit in February better than expected at -USD 49.4 billion (expected -USD 53.5 billion), the lowest in 8 months, with exports to China increase by more than 18%, causing the trade deficit with China to be reduced to about USD 30 billion +/-. That was partly due to the export of aircraft and companies in the US accelerating the export of goods before China hiking tariffs for the next round (The deadline was March 1). As a result, the US trade deficit decline YTD by 7% YoY.

Now Maybank sees significant developments that may lead to trade negotiations in 1-2 months ahead, for example, sources indicate that China is preparing to change some types of import tariffs from the United States, such as agricultural products. The agricultural states are considered a key base of president Trump (based on February US exports of soybeans more than 15% MoM). Therefore, Maybank expects trade negotiations to end various issues in late April – early May which will be positive for the economic recovery in the second half and towards the global plays sectors.

 

April 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%. HOLD PTTEP, BEM and BJC.    

 

Big Issue

1) The NBTC will allocate 45 MHz of bandwidth on the 700-MHz range dividing into three licenses. Each contains 15-MHz of bandwidth at 25 billion baht.
2) The Constitutional Court undecided on party list seat calculation formula.

 

Stock Pick & Trading Idea
Trading Buy PTT, expecting 1Q19 earnings to rise QoQ, due to the recovery of the refinery and petrochemical operations, stock loss turning to profit, as well as the net profit of PTTEP that is expected to recover QoQ after no extra expenses.

In addition, the main business of PTT also benefited from an increase in oil prices through increased margins in the supply of gas for industrial customers. The share price YTD is laggard the Energy sector by about 5%. The target price is ฿55.0/share. Technically, if passing the upper band at ฿49.50/share, the trend is positive (support ฿47.00/share, resistance ฿49.50/share).

 

Technical View
Test key resistance at 1675, if passes, more upside: The index continues recovering after managed to hold above 1655. The MACD indicator remains above the signal line is testing the key resistance at the neckline 1675. If it breaks out the level, it will form an inversed H&S and shift to a positive uptrend with the next upside at 1690 and psychological resistance level at 1700. But if it corrects, the sub support levels will be at 1665 and 1655 (EMA 200 Days). To maintain the positive momentum, the index should not slip through these levels.

 

Investment Strategy
1) Investors with stocks, if passes 1675, let profit runs until it reaches resistance 1690. If it corrects, use 1665 as a lock profit spot.
2) Without stocks, gradually buy stocks at support levels 1665-1655 or wait to buy if it passes 1675.

 

Maybank sets a support line at 1665 points and 1655 points while setting a resistance line at 1675 points and 1690 points.

 

Keep an Eye on
1) OPEC meeting Apr 17-18.
2) China reports GDP growth.
3) The Constitutional Court to rule on a formula to calculate party-list MP.