Daily Strategy for Investors on May 8, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on May 7, 2019, stating the SET on Tuesday experienced selloff, driven by selling pressure on global play stocks led by PTTGC, IRPC, TOP, BANPU and media stocks RS, BEC and WORK.
The index closed at 1,669.6 points (-9.3 points) with a trading value of THB 50 billion, (THB 43 billion the previous day). Foreign investors continued to net sell Thai shares by THB 635 million, institutional investors net sold by THB 1.4 billion. There were net Short on SET50 index future by 11,041 contracts.   

Investment Theme: Consumption is growth engine to maintain Thailand’s GDP
The growth engines driving the Thai economy are now facing risks, starting with the investment sector that saw a slow growth of -1.3% in 1Q19 and is expected to further slowdown as it clings on the clarity of the new government forming. Another key driving force is the exports, also slow down as well at -3.6% (BOT), affected by the US-China trade war. Thailand exports to both countries accounting for more than 22% of the total exports.
Recently, a hope for a recovery in exports in 2H19 is getting derailed as risks arising after the US president Trump threatened to raise the third round of tariffs for USD 300 billion (from current USD 250 billion) while raising tariffs to 25% for existing USD 200 billion of imports. The clarity and official results should be acknowledged in the next few days. Initially, if Trump actually raises tariffs, Maybank estimates the SET index may decline to test the key support at 1620+/- area.
Maybank recommends gradually accumulate domestic plays stocks expecting strong growth with limited impact from trade war. Those include retail (BJC). In addition, retail stocks also benefit from the short term economic stimulus measures previously launched, totaling THB20b. But if the trade war results come out positively, it will positively impact the SET significantly, especially logistic and energy sectors (PTT, PTTEP, PRM).        

Investment Theme
Recommend follow-up on trade negotiations between the US and China, which, if it comes out unlike Maybank and the market forecast, with the US raising tariffs, it is expected to result in a change in the investment strategy and the SET index movement from the original assumptions Maybank estimates at 1,620 +/- points. However, for domestic political factors, Maybank has a neutral view.       

Big Issue
EC endorses 349 constituency MPs.

Stock Pick & Trading Idea
Several factors to watch today:
1) Morning: Constitutional Court to rule on the constitutionality of the EC’s formula to calculate party-list MPs.
2) Afternoon: EC to endorse MPs.
3 )Night: China’s representative Liu He starts trade negotiations.
These three factors have direct impact on investment sentiment. Maybank put more weight on foreign factors such as trade negotiations rather than a domestic political factor. Recommend halt your investment to wait and see, The first support area today is 1655+/- point. For low-risk takers, halt your investment.  

Technical View
SET likely to move sideways, index may decline, wait to buy stocks at support: The index moved down after failing to breakout the resistance 1680. There was buying back pressure intraday. Given the RSI indicator showing a Bearish Divergence signal, Maybank expects the index to move sideways in a range of 1655-1680. But with the Brent crude oil price dropped -1.90% last night, Maybank expects the selling pressure would continue in the morning. Wait to buy stocks at supports 1655-1660.  

Investment strategy
1) Investors with stocks, if weakens and slips through 1665, gradually take profit and wait to buy back at key support 1655. But if rebounds, take profit for next trading round.
2) Without stocks, wait & see buyback pressure intraday, wait to buy on dip at supports 1655-1660.

Maybank sets a support line at 1640 points and 1655 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. BOT meeting.