Daily Strategy for Investors on May 3, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on May 3, 2019, stating the SET on Thursday slightly gained driven by buying pressure on energy stocks like PTT, PTTEP, SGP and power plant stock EA.

The index closed at 1,679.1 points (+5.6 points) with a trading value of THB 46 billion, (THB 41 billion the previous day). Foreign investors switched to net sell Thai shares by THB 340 million, institutional investors net bought by THB 1.8 billion. There were net Long on SET50 index future by 3,219 contracts.

Investment Theme:  Thailand GDP forecast revised down by 20bps to 3.6%
Maybank begins to see weak signals in the domestic economy in 1Q19, led by export sector (-3.6%, according to BOT), the first negative domestic investment in 2 years (-1.3%), mainly driven by US-China trade war that resulted in global exports declined. It is also the transition of the government, causing a slowdown in investment. As a result, Maybank expects the quarterly GDP to be reported on May 21 to grow only 3.1%, down from 3.7% in 4Q18. Initially, Maybank estimates the short-term economic stimulus policy that the Cabinet has just announced, with a total amount of THB 20 billion, divided into injections through government welfare cards of THB 13 billion and tax cuts will be able to stimulate short-term consumption.
However, the export sector, state and private investments still face risks. Therefore, Maybank revised this year’s GDP forecast from 3.8 to 3.6%. And another key factor that investors should closely monitor is the trade negotiations between the US and China which Maybank anticipates it comes close to conclusion this month. Recently, Mnuchin, a US trade representative stated that the details will be disclosed on Friday May 10. If both sides agree to cancel all trade barriers (USD250 + USD110 billion), this should become a driving factor for the SET to rally to test the key resistance area at 1,690 +/- points.

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 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) Constitutional Court to rule on calculation of list MPs.
2) EC disqualifies another 11 ex-MP candidates from 7 parties.
3) Brent dropped 2.4% to USD70.45.

Stock Pick & Trading Idea
In May, Maybank recommends accumulating 4 stocks,:
1) PTT (55.0). Maybank have a mild positive view on crude oil prices, as it  is a Laggard of 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, more upside: The index continues swinging in uptrend channel with the key resistance being at 1680 as the gap was previously opened. If it is able to break out this level, the next resistance is 1690.
In the near term, eyes on a correction since the MACD indicator remains below the signal line while the Stochastic is in the overbought zone. The first support level is 1665. If it holds above such level, it is likely to recover and gain to test 1680. But if dips below 1665, the key support is 1655 (EMA200 Day).

Investment strategy
1) Investors with stocks, if it break out the resistance 1680, let profit run to 1690- 1700. But if fails, 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 1690 points.

Keep An Eye On           
1) Trade talks results announced on May 10.
2) Constitutional Court to rule on the constitutionality of the EC’s formula to calculate party-list MPs on May 8, at 9.30am.