Daily Strategy for Investors on April 22, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on April 22, 2019, stating on SET last Friday moved in a tight range, driven by buying pressure on petrochemical stocks led by PTTGC, IVL and media stocks WORK and BEC. However, KBANK and TISCO were sold.

The index closed at 1,674.1 points (-0.9 points) with a trading value of THB 36 billion, (THB 47 billion the previous day). Foreign investors continued to net sell Thai shares by THB 174 million, institutional investors net bought by THB 604 million. There were net long on SET50 index future by 3,478 contracts.

 

Investment Theme: Banking earnings steady, eyes on Constitutional Court verdict
The banking sector reported 1Q19 earnings of THB 47 billion (8 banks under our coverage exclude KTB), up 6% YoY. If excluding extra gain, BAY posted a 7% YoY drop in earnings, close to the market forecast. KBANK posted lower than expected non-interest income but with well-controlled costs. Its earnings slightly beat the forecast. SCB posted weaker fee income, provision for employees, lower NPL and earnings in line. BBL posted earnings in line while TMB lower than expected.

Overall, several banks reported lower than expected non-interest income, partly due to lower fee income and provision for employees benefits. However, many banks successfully managed other expenses, leading to most earnings coming out as in line with the market forecast. Maybank believes that the banking share prices should swing in a range on anticipating on the economic outlook after the election and a chance of interest rate hike for loans.

For the investment outlook in the stock market, the SET is approaching the monthly resistance levels that Maybank previously assessed. It is likely to retrace in a range of 1660-1680 to wait for 1) 1Q19 earnings results of the energy and retail sectors, 2) outcome of the Constitutional Court verdict on the party list MPs seats calculation formula on April 24 and 3) the results of the trade negotiation between China and US in May.

 

Big Issue
Government plans to launch economic stimulus measures (consumption and tourism among secondary cities).

 

Stock Pick & Trading Idea
Maybank recommends to gradually accumulate BJC, target price THB 65. BJC should directly benefit from the government’s stimulus measures while fundamentally, 1Q19 earnings are forecast to grow 20% YoY, strongest growth in the retail sector. It is trading with a low PER 19 of 28x.

Moreover, Maybank also recommends for trading buy PTT, target price THB 55. Technically, if the price passes the upper band of 49.50, the trend should become positive (support level is 47 and resistance at 49.50).

 

Technical View
Likely to move sideways and cool down the indicator: The index continued moving sideways for a second day. It was unable to break out the neckline’s resistance level of the 1675-1680 zone. So, it is only forming the right shoulder of the reversed Head and Shoulders pattern. In the near term, the index is expected to move sideways to cool down the indicator that has approached the overbought zone. But given the main trend is the uptrend, if the index weakens, it is a chance to accumulate stocks at the supports 1665 and 1655.

 

Investment ฆtrategy:
1) Investors with stocks, if rebounds but fails to breakout 1675-1680, partly take profit for the next trading round. But if it opens below 1665, lock the profit.
2) Without stocks, gradually buy stocks at support levels 1665 or 1655 but if it breaks 1680, follow buy.

 

Maybank sets a support line at 1655 points and 1665 points while setting a resistance line at 1680 points and 1690 points.

 

Keep an eye on
1) US reports GDP on Apr 26.
2) Thailand reports exports figures on Apr 22.
3) The Constitutional Court to rule on the formula to calculate party-list MP on Apr 24.