Daily Strategy for Investors on June 7, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on June 7, 2019, stating on the SET Thursday swung in a narrow range driven by buying pressure on construction stocks led by CK, ITD, STPI and SEAFCO.
The index closed at 1,653.4 points (+4.9 points) with a trading value of THB49 billion (THB54 billion the previous day). Foreign investors net bought Thai shares by THB1.048 billion. Institutional investors net bought by THB1.8 billion. There were net long on SET50 index future by 4,037 contracts.

Investment Theme: PM forming his cabinet
After the House of Representatives have voted former PM Chuan Leekpai for the speaker of the house and MPs and senators overwhelmingly voted for Gen Prayut Chan-o-cha to be prime minister of Thailand late on Wednesday night, the political situation becomes clearer. The next step is that the name of the prime minister would be submitted for His Majesty the King’s approval.
Then Gen Prayut will be the head of a coalition government led by the Palang Pracharath Party which should be settled within a few weeks prior to submitting for HM the King’s approval.

Maybank expects the government formation should complete before the ASEAN Summit taking place. Previously, the market expressed concerns about the minority government. But after the vote for the speaker of the house, deputy speakers and the prime minister, it was found that the votes of the government and the opposition is 255:245. This has led to easing concerns about the deadlock at some extents.  Maybank has a neutral view on this issue. In the meantime, Maybank has expectations over the short term economic stimulus measures to push up the economic growth after it was affected by slowing exports and investments.

Initially, Maybank expects to see the approval of several major infrastructure projects such as the Western Orange Line, Purple line, electric train linking 3 airports and others.
JSCCIB prepares to propose for the new government to launch measures to stimulate the property market and continue its EEC project. Maybank has a positive view on this issue. Currently, the Thai economic growth is 3.2% (consumption grow 4.1% while exports -0.1%).

Investment Theme
Maybank estimates the SET index to swing in a range of 1,585-1655 points. If based on fundamental, Maybank still recommends accumulate stocks in defensive and domestic play sectors led by EA, BEM, CPALL, and CK.

Big Issue
Brent rose 2.8%. Thai Baht continued strengthening to THB31.2 vs USD.  

Stock Pick and Trading Idea

Accumulate CK (target price at THB31). After the new government has been formed, Maybank expects to see progress in government projects auctions where CK is likely to gain several megaprojects in the future. That includes the construction of the Orange Line (West), Purple Line Extension, Double Deck expressway and Electric trains linking three airports. These projects should double its backlog from the current THB40-50b. The stock is trading at a low PBV of 1.7x, lower than STEC AT 3.1X. Earnings are expected to grow by 10%.

Technical View
If breakout 1653 (EMA200Day), new cycle of uptrend: The SET index managed to steadily maintain in the area of 1653 (EMA200Day). Even though it corrected intraday, a strong buying pressure on property, transport and construction sectors came in to help push the index to stand still. If it can breakout the resistance 1653, follow buy because the trend will switch from sideways to uptrend. The next resistances are 1665 and 1675. If weakens during the day but holds above 1645, accumulate stocks.

Investment strategy
1) With stocks, hold stocks if it manages to maintain above 1645, take profit at resistance 1665 and 1675. If dips below 1645, gradually lock profit.
2) Without stocks, if weakens to test the support 1645, accumulate stocks for trading.

Maybank sets a support line at 1630 points and 1645 points while setting a resistance line at 1665 and 1675 points

Keep an Eye On
OPEC meeting June 25-26. G20 Summit June 28-29.