Daily Strategy for Investors on May 9, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on May 9, 2019, stating the SET on Wednesday experienced a selloff, driven by selling pressure on stocks that price sharply gained previously led by power plants EA, CKP, BGRIM and finance MTC and SAWAD.
The index closed at 1,654.0 points (-15.6 points) with a trading value of THB 54 billion, (THB 50 billion the previous day). Foreign investors continued to net sell Thai shares by THB 1.9 billion, institutional investors net sold by THB 2.1 billion. There were net Long on SET50 index future by 868 contracts.   

Investment Theme: More clarity on Thai politics
The Constitutional Court on Wednesday ruled that the contentious stipulation in the MP election law for calculating the number of party-list MPs did not violate the Constitution. The Election Commission (EC) yesterday also endorsed 349 successful constituency candidates for the House of Representatives, of the 350 seats contested.
The EC’s decision to allocate seats to 27 parties came amid strong pressure from politicians who have constantly warned the move was unconstitutional and they may pursue legal action against the poll agency. Several parties see more clarity on the government forming except for the Democrat party which awaiting the meeting to select new leader on May 15. Maybank has a neutral view on this case as the market has priced in already.
In the near term, Maybank suggests investors focus on the US- China trade talks which prolonged for over a year (more than 10 meetings). Within the next couple of days, China’s representative Liu He will begin the negotiation. Initially, Maybank believes both sides have each advantage as the US set to raise tariffs for the new round while China has been affected reflecting in the -2.7% growth of exports last month. This has led to concerns about GDP forecast revision.
However, China also has advantage over the US, in terms of politics, as the US president Trump’s tariffs hike policy may affect the president’s vote base for the next election in late 2020. Especially in the agricultural states. So Maybank believes that this meeting should not see a 100% conclusion, but with some improvements.  

Investment Theme
The results of the US-China trade talks are divided into 3 scenarios (follow Trading Idea section). Initially, recommend holding cash of not less than 40%, HOLD BEM, PTT, PRM and BJC.  

Big Issue
1) BOT keeps interest rate at 1.75%.
2) China reported exports growth of -2.7% in April, trade surplus declined to USD 13 billion.

Stock Pick & Trading Idea
3 scenarios for US-China trade talks results
Case 1) If the US insists on 25% tariffs hike on the USD 200 billion worth of goods, the SET is expected to partially respond to it.
The index may swing in a range of 1,620 +/- recommend accumulating retailers stocks with limited impact like BJC.
Case 2) If the US plays it the hard way by raising 25% tariffs and increasing the product limit to USD 300 billion, there is a chance that the global stock market will be in a risk-off situation.
The SET’s first support area is at 1,585-1,600 points. Recommend slow down the investment to wait for the next progress of the negotiations.
Case 3) If all is just threatening and causing China to accept the agreement, the US may cancel all trade tariffs, the global stock markets are expected to technically rebound.
The SET may swing sideways up in a range of 1,655-1,700 points. Accumulate logistic and energy stocks.

Technical View
If dips below 1650, sell stocks to reduce portfolio, uptrend may end:  The index declined driven by selling pressure on big caps in all sectors. It is now moving down to test the key supports at 1650-1655 (EMA200 Day) which is the last support lines of the uptrend. If it dips below such level, meaning the end of the uptrend and the outlook will switch to sideways downward. So, if it dips below 1650, lock profit or stop loss and wait and see, until it forms a base and stop sliding.   

 

Investment strategy
1) Investors with stocks, if weakens and slips through 1650, take profit or lock profit. If rebounds, take profit at resistance level to reduce portfolio. and wait to buy back at key support 1655. But if rebounds, take profit for next trading round.
2) Without stocks, wait & see. For risk takers, wait to buy on dip at support 1650 for a brief rebound trading.  

Maybank sets a support line at 1620 points and 1650 points while setting a resistance line at 1665 points and 1675 points

Keep An Eye ON
Trade talks results announced on May 10.