Daily Strategy for Investors on June 14, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on June 14, 2019, stating that SET yesterday experienced a selloff driven by selling pressure on the energy stocks led by PTTEP, BANPU, IRPC, SPRC and power plants EGCO and GULF. However, strong buying pressure was spotted on retailers CPALL and HMPRO.

The index closed at 1,674.1 points (+3.0 points) with a trading value of THB55b (THB44b the previous day). Foreign investors continued to net buy Thai shares by THB2.889b. Institutional investors net sold by THB3.715bm. There were net Short on SET50 index future by 6,333 contracts.

 

Investment Theme: SET likely to correct, awaiting new catalyst and clarity on 3 key events. Over the past two weeks, the global stock markets strongly gained; MSCI World +2.4%, EM +3.9%, Thai Baht strengthened 2% vs USD.

The SET index also rose more than 50 points. That was after FED chair Powell adjusted his interest rate policy. However, Maybank estimates that the SET may start to briefly correct to wait for clarity on 3 key events:

1) The G20 Summit in Japan on June 28-29.
2) OPEC meeting on June 25-26.
3) FED chair Powell speech after the FOMC meeting on June 19-20.

Basically, Maybank believes FED may keep interest rate unchanged at 2.25-2.50%. The FED chair also hinted that the rate cut may occur in 2H19. In conclusion, Maybank has a neutral view on the G20 summit, a mild positive view on FOMC and OPEC meetings. These latter two issues have an impact on the downside of the market through the energy sector (crude oil price) and earning yield gap if the US bond yield declines. Maybank maintains focusing on investment in the domestic plays stocks.

Maybank estimates the SET index this week to swing in a range of 1,645-1670 points. Maybank still recommends accumulate PTTEP (global plays) and speculate domestic plays stocks led by WORK, CPALL and S.

 

Big Issue
1) EXAT unveiled that the attorney is considering the draft contract, which is in accordance with the prosecution of disputes between EXAT and BEM.
2) Brent up 2.2% after the fire on tankers in the Gulf of Oman.

 

Stock Pick and Trading Idea
CPALL: TRADING BUY, TP THB86. Maybank expects CPALL to directly benefit from the government’s economic stimulus measures. 2Q19 earnings are forecast to grow no less than 15% YoY, boosted by SSSG (%) expected to grow 3% and margin (%) rising about 10-20bps. For store expansion this year, it may exceed its target of 700 stores pa as it has opened 311 stores in 1Q19. The clarity on terms of the deal in Cambodia and Laos should be in 3Q19, which is an upside risk to earnings forecast.

 

Technical View
SET to swing in a range of 1675-1690, gradually take profit at resistances: The SET index swung sideways in the morning before gaining driven by buying pressure on the energy stocks due to a rebound in crude oil prices. The index has gained to test the resistance level of the ascending triangle in 1675. Given a strong buying pressure, we expect the index may have a positive momentum to keep on gaining and swing in a range of 1675-1690. But with a likelihood that it may correct, therefore, if it rebounds to test the resistance 1690, take profit for a cyclical trading.

 

Investment Strategy
1) With stocks, if rebounds, take profit at resistance 1690. But if dips below 1670, gradually lock profit.
2) Without stocks, if weakens to test the support 1660, accumulate stocks.

 

Maybank sets a support line at 1660 points and 1670 points while setting a resistance line at 1690 and 1700 points

 

Keep an Eye On
1) OPEC meeting June 25-26.
2) G20 Summit June 28-29.
3) Government forming should complete within the next few weeks.