Daily Strategy for Investors on May 2, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on May 2, 2019, stating the SET on Tuesday had a sharp gain driven by buying pressure on power plant stocks BGRIM, EA, GULF, CKP and GPSC including construction sector CK, STEC.

The index closed at 1,673.5 points (+6.8 points) with a trading value of THB 44 billion, (THB 43 billion the previous day). Foreign investors switched to net buy Thai shares by THB 412 million, institutional investors net bought by THB 1.2 billion. There were net Short on SET50 index future by 133 contracts.

 

Invest Theme: Cabinet approves several stimulus measures
The Ministry of Commerce reported 1Q19 export growth of -1.6% (dollars) and the Bank of Thailand forecast GDP this year is likely to be lower than 3.8% as a result of the trade war between the US and China.

The cabinet on Tuesday approved many measures to stimulate the domestic economy, led by 1) increasing credit through state welfare cards for 4 groups, totaling THB 13 billion. Parents with children (THB 500 for school uniforms and others, totaling 2.7 million people), farmers (THB1,000, 4.1 million people), people with disabilities (THB200, 1.1 million people) and raise money for holders of the welfare card to THB500 from the original THB2-300, a total of 14.6m people. 2) Individual tax deduction measures not more than THB15,000 in the consumption of books, sports, OTOP products, promoting tourism in secondary cities and property for first home buyers of not more than THB5m house. Initially, Maybank has a mildly positive view on these short term measures. It gives positive sentiment to the retail sector and credit card (BJC, KTC).

However, in the mid to long term, the Thai economy still has to rely on exports and investor confidence through accelerating the establishment of the government in July. Meanwhile, last night, the Fed kept interested rate unchanged as the market expected. However, Powell stated there was no need to cut interest rates causing the dollar to return to a slight appreciation which is in line with Maybank’s view.

 

Investment theme in May
SET index in May, fluctuating in the uptrend at 1,655 – 1,700 supported by 1) increasing the weight of Thai NVDR in MSCI 2) starting to see the clarity of government forming 3) positive outlook on the US-China trade talks 4) The US-Middle East political problem will support crude oil prices. Recommend Hold cash of not less than 40% and trading buy PTT (55.0) BEM (12.0), BJC (65.0), PRM (12.40).

 

Big Issue
1) BOT reported 1Q19 trade surplus of USD14.5b.
2) March factory output falls 2.54% on an annual basis to 115.68.
3) FED holds interest rate at 2.25-2.50%.

 

Stock Pick & Trading Idea:
In May, Maybank recommends accumulating 4 stocks,
1) PTT (55.0). Maybank has a mildly positive view on crude oil prices, as it is a Laggard of the energy sector by over 5% YTD.
2) BEM (12.0) expects to see a clear extension of the expressway concession in late May and the opening of the Orange line auction in 2Q19 while it laggard BTS price by 11%.
3) BJC (65.0) expects indirect benefits from the government short-term economic stimulus measures. The 1Q19 earnings tend to be the most outstanding at 22% YoY.
4) PRM (12.40), expects 1Q growth of 43% YoY and continue to grow in 2Q. Indirect benefit from crude oil price sideway up.

 

Technical View
SET to retest resistance 1680, if successes, further uptrend:  The index bounced up from the support if the sub uptrend channel and hit the previous high and neckline of the reversed Head and Shoulders at 1680. If it surpasses this level, it will be a new uptrend with key resistances at 1690 and 1700. But if it fails to surpass 1680, it is a chance to take profit as the index should return to swing sideways in a range of 1655-1680 again.

 

Investment Strategy: 1) Investors with stocks, if it breakout the resistance 1680, let profit run to 1700. But if fails to break 1680, take profit for next trading round. 2) Without stocks, If breaks 1680, follow buy. But if fails, wait to buy on dip at supports 1665 or 1655.

 

Maybank sets a support line at 1655 points and 1665 points while setting a resistance line at 1680 points and 1700 points.

 

Keep an Eye On
1)  Trade talks results announced on May 10.