Daily Strategy for Investors on May 29, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on May 29, 2019, stating on the SET Tuesday closed with a gap in the last minute of the trading session, pushed by buying pressure on MSCI led by BDMS and SCC. PTTGC were heavily bought after it announced a share buy back plan.
The index closed at 1,632.0 points (+7.2 points) with a record high trading value of THB 200 billion, (THB 51 billion the previous day). Foreign investors switched to net buy Thai shares by THB12.5 billion, institutional investors net sold by THB 7.6 billion. There were net long on SET50 index future by 32,590 contracts.   

Investment Theme: SET swings on trade war progress
Currently, the stock markets worldwide swing in a narrow range. The major turning point that will affect the wider range is the tariffs hike began to cover more downstream products, especially consumer products (mostly in the production process in the past). It will increase again if the US increases the value limit to USD 300 billion covering more than 3,800 products, with the expectation that the consumer products ratio will increase from 2% to more than 30% since the first tariff hike.
The USTR will discuss this during June 17-24 before Trump and Xi Jinping meet on June 28-29 in Japan. In addition to the impact of exports – investment to GDP and US bond yields that have already begun to decline reflecting concerns. The tax increase on consumer goods will begin to affect more people and expected to accelerate inflation.
Foreign economists predict that the US-Core PCE will increase by 0.6%, which, if there is no 12th trade negotiation before the G20 summit, Maybank estimates that the IMF is likely to cut growth forecast for the global economy again from the current 3.3%, which will open the downside of the stock market.

Investment Theme  
Maybank estimates the SET index to swing in a range of 1,630 +/- points (unclear on trade war issue). Therefore, Maybank recommends domestic play stocks.

Big Issue
1) Thailand’s MPI index in April rose by 2.03% year-on-year, thanks to air condition and cars production, according to the Office of Industrial Economics (OIE).
2) The United States 10-Year Bond Yield dropped to 2.25%.

Stock Pick and Trading
For investors who bought stocks at around 1600 +/- points for speculation, partly take profit and wait & see the progress of the trade war negotiation.

Technical View
Strongly hold above 1620, momentum should continue, but focus on profit-taking
The SET index continued moving sideways down all day, driven by buying pressure on energy and petchem sectors while selling pressure was seen on construction material and transports sectors. But in the end of the trading session, a strong buying pressure has pushed the index to close in a positive terrain with a long wick candlestick. So Maybank believes the momentum should continue as it managed to maintain above the neckline 1620 ultimately. However, since the trend remains sideways, investors are recommended speculating stocks intraday and take profit if the index gains to test the resistance.

Investment Strategy
1) With stocks, if rebounds intraday, take profit at resistances for the next cyclical trading as the trend remains sideways. But if dips below 1620, lock profit.
2) Without stocks, if weakens, accumulate buy stocks at support 1620-1625 for the next cyclical trading.

Maybank sets a support line at 1600 points and 1620 points while setting a resistance line at 1640 points and 1655 points

Keep an Eyes On
1) US to report 1Q19 GDP on May 30 and China reports PMI Manufacturing. China raises tariffs on import goods from US worth USD 60 billion.
2) Parliament to vote for Prime Minister during May 31-June 9.