Daily Strategy for Investors on May 10, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on May 10, 2019, stating that the SET yesterday was still pressured by concerns about the trade war issue while domestic politics began to ease. The selling pressure was seen on the energy stocks (PTT, PTTGC) and hospitals (BDMS).

The index closed at 1,646.8 points (-7.2 points) with a trading value of THB 45 billion, (THB 54 billion the previous day). Foreign investors continued to net sell Thai shares by THB 2.2 billion, institutional investors net sold by THB 1 billion. There were net Short on SET50 index future by 7116 contracts.

 

Investment Theme: SET to swing ahead of trade war results
The US-China trade negotiation is getting closer to the conclusion. The meeting of Mr. Liu He, China’s chief negotiator in the trade talks, with the US representatives, is considered a key event to decide whether the trade war that prolonged for a year will end in which way. Yesterday, president Trump said in his twitter that this negotiation may fail.

As a result, the risky assets markets worldwide continue to fall for 3 days. If it actually fails, the markets will focus on both stances and what countermeasures to be launched from both sides. If consider Trump’s threatening earlier this week that he wants to raise import tariffs on USD200b worth of products from 10% to 25%, the stock markets worldwide and the SET have weakened to respond to this issue at some levels.

So, if this is it, Maybank believes the impact will not be significant. However, if Trump wants to raise tariffs on USD 300 billion worth of goods, this will be a negative surprise to the risky assets markets around the globe and they may experience a sharp fall. The SET index is likely to slip through the key support level at 1600 points. All in all, investors are recommended to keep a close look at this issue.

 

Stock Pick & Trading Idea
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.

3 scenarios for US-China trade talks results

Case 1) If the US insists on 25% tariffs hike on the USD200b 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 a limited impact like BJC.

Case 2) If the US plays it the hard way by raising 25% tariffs and increasing the product limit to USD300b, 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.

Big Issue
US  president Trump yesterday signaled there is hope for trade war negotiation to end well, boosting Dow Jones to technically rebound. Keep an eye on the trade talks results.

 

Technical View
SET dips below 1650, sideways ahead, if dips below 1620, downtrend for sure:  The index declined driven by selling pressure on big caps in energy, food and hospital sectors. As a result, it slips through the last support line of the uptrend at 1650. So we see that the uptrend outlook is finished. The index tends to move sideways in a range of 1620-1655. Recommend wait and see until the index starts to form a base and stops slipping. In the medium term, if it dips below the neckline support at 1620, the trend will switch to downtrend.

 

Investment Strategy:
1) Investors with stocks, must take profit or lock profit after the index dips below the support 1650. Use the low 1646 as a stop loss spot.
2) Without stocks, wait & see until the index starts to form a base and stops slipping. Supports are 1640 and 1620.

 

Maybank sets a support line at 1620 points and 1640 points while setting a resistance line at 1655 points and 1675 points

 

Keep An Eye On
1) Trade talks results announced on May 10.
2) Last day of digital TV operators to return license.