Daily Strategy for Investors on May 31, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on May 31, 2019, stating on the SET on Thursday moved in a narrow range, driven by buying pressure on EA and PTG, including defensive stocks like BTS, BGRIM and RATCH.
The index closed at 1,621.5 points (+2.2 points) with a trading value of THB 45 billion, (THB 55 billion the previous day). Foreign investors continued to net buy Thai shares by THB 2.67 billion, institutional investors net sold by THB 3.25 billion. There were net long on SET50 index future by 2,401 contracts.

Investment Theme: Global play sectors have downside to EPS forecast
Apart from China, other countries are getting more risky after the US president Trump using import tax hike as a tool to negotiate. Especially the countries with high trade surplus over the US like China, Canada, Mexico, Germany, Japan and others.
This morning, Trump said he is planning to raise tariffs on imported goods from Mexico covering all types of goods by 5%, effective on June 10. (caused by the border wall and immigration). Currently, the global play stocks led by energy, petchem and refinery (accounting for about 26% of the SET market cap), are a group that analysts revise down earnings estimate for this year.
Since the beginning of the year, the energy and petchem sectors were revised down by 10-18% (SET -6.8%), mainly due to the assumption revision of petrochemical spreads, such as PE, PX, GRM, Coal prices, and Oil prices. These were revised down due to the impact of the trade war and as a result, the prices of many stocks declined to trade at a level higher than -1SD (7 years back).
The key factor to drive the SET on a steady course in the long run is the recovery in these sectors which mainly depend on the trade negotiation. If the US continues raising tariffs on goods worth USD 320 billion, it will certainly pressure the global trade and downside will open wider. The share prices will be pressured resulting in a likelihood that the SET EPS to dip to 105x.

Investment Theme
Maybank estimates the SET index to swing in a range of 1,600-1630 +/- points (unclear on trade war issue). Maybank recommends domestic play stocks.

Big Issue         
1) PPRP leader officially invited Chatthaipattana to join the coalition.
2) Brent dropped 4% to USD64.5.
3) China halts purchases of US soybeans. China Manufacturing PMI dips to 49.4.

Stock Pick and Trading Idea
1) For low-risk takers, wait & see the clarity of the trade war that lacks of progression.
2) With the index staying at an area of 1600 +/- points, for risk takers, wait to buy domestic play stocks like CPALL (target price at THB 86).

Technical View
Back to swing sideways: The SET index recovered and regained after managed to hold above 1618-1620 level, which is a lower band of the sideways trend. Coupled with a mild bullish divergence signal in the RSI indicator, meaning that it has a chance to recover. The first resistance is 1632, the previous high and the EMA200Day is at 1650. But if it retraces and dips below 1618-1620 today, it is likely to continue correcting. The first support is 1610 and followed by 1600 which is a key psychological support level.

Investment Strategy
1) With stocks, if rebounds intraday, take profit at resistances to reduce portfolio. But if dips below 1620-1618, stop loss.
2) Without stocks, if manages to hold above 1618, buy stocks and take profit on a rebound. If dips below 1620, stop loss.

Maybank sets a support line at 1618 points and 1610 points while setting a resistance line at 1632 points and 1650 points

Keep an Eye On
1) China raises tariffs on import goods from US worth USD60b on June 1.
2) Parliament to vote for PM during May 31-June 9.