Daily Strategy for Investors on May 22, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on May 22, 2019, stating on the SET Tuesday swung narrowly driven by selling pressure on global play stocks like KCE, SPRC, and PTTGC. However, strong buying pressure was seen on domestic play stocks led by STCE, KBANK, and SCB.
The index closed at 1,610.4 points (+2.3 points) with a trading value of THB 50 billion, (THB 4.7 billion the previous day). Foreign investors switched to net buy Thai shares by THB 834 million, the first time in 12 days, institutional investors net sold by THB 462 million. There were net long on SET50 index future by 13,158 contracts.   

Investment Theme: NESDB cut GDP forecast
The NESDB yesterday reported 1Q19 GDP growth of 2.8% as expected, the lowest in 17 quarters, mainly due to the US-China trade war affecting exports growth of 3.6% and slow public and private investments prior to the general election. Overall, the agency has cut its 2019 GDP forecast range to 3.3% to 3.8% (from 3.5% to 4.5%), mainly on weaker exports of goods & services. Maybank also cuts GDP forecast to 3.2% (from 3.6%), exports growth from 2.2% to -0.1%. However, Maybank maintain domestic consumption growth at 4.1%.
The key factor is the budget disbursement that should depend on the House of Representatives resolution in the late of 3Q19.
In terms of loans in 1Q19, it grew 10% in consumption sector especially in the residential. Homebuyers accelerated the purchase before the LVT measure effective on April 1 and auto loans. NPL remains stable at 2.94% while SMEs saw continued rising NPL to 4.60%, mainly due to the exports have been affected, rising competition and  the construction sector.
Overall, Maybank forecasts the Thai economy is still at risk as downside risks have risen with the escalation of the US-China trade war and given the worse than-expected 1Q GDP.
The new government must accelerate budget disbursement, boosting confidence among the private investment and domestic consumption to drive the GDP to continue growing.

Investment Theme
The SET index dropped more than 70 points, leading to earning yield gap rising to maintain above the 10 years average at 4.27% (10-yrs avg is 4.25%). This is an attractive level for investment.       

Big Issue
1) The NESDB reported 1Q19 GDP growth of 2.8% as the market forecast.
2) Indonesia election: Joko Widodo re-elected as president.

Stock Pick and Trading Idea
1) Given the aforementioned foreign factors pressuring the investment sentiment, low-risk takers should halt your investment to wait for the clarity.
2) For high-risk takers, accumulate PTTEP, (THB 150+8 from Murphy). 2Q19 earnings are forecast to improve QoQ alongside the Dubai crude oil price QTD rising 11% QoQ while gas price steady QoQ. Sales volume should increase by 3-4% QoQ, mainly from South Bongkot project readies to resume operation after maintenance shutdown.

Technical View
If fails to hold above 1620, likely to slip, key support is 1600 : The SET index continued slipping after dipping through the neckline 1620 and formed the double top pattern. In the near term, the index is likely to rebound after the RSI indicator approaching the oversold zone. But the upside is only at 1620, which was a key support level. If it fails to pass this level, the trend should remain downtrend with the key support at 1600, which is a psychological support. If fails to hold above 1600, new downside would move down to 1580.

Investment strategy
1) Investors with stocks, stop loss as previously recommended. If not, use a rebound near 1615-1620 for a stop loss to reduce portfolio or the low 1604.
2) Without stocks, wait & see until the trend is clear or strong rebound.
Maybank sets a support line at 1580 points and 1600 points while setting a resistance line at 1620 points and 1630 points

Keep an Eye On
House of Representatives opens on May 24-25 and select the speaker of the House.