Daily Strategy for Investors on July 26, 2019

Krungsri Securities has made an analysis for the trading session on July 26, 2019, stating that the SET Index yesterday ended up 5 points (+0.3%) at 1,731, in-line with regional markets, in turnover worth THB 58 billion. The market was supported by the announcement of Thailand’s national strategy and expectations the ECB would signal to cut rates and possibly deploy QE again.

There was buying in FIN and HEALTH counters. Foreign investors were net buyers of Thai stocks at THB 1,302 million and bonds at Bt793mn, but Net Short TFEX at 6,238 contracts.

Krungsri Securities has a neutral view on the market today, expecting the SET Index to swing between 1,720 and 1,740. Investors are awaiting the FOMC meeting on 30-31 July where they expect rates to be cut by 0.25%, and the US-China trade talks in Beijing. Although there are little expectations for an amicable conclusion, markets expect positive progress.

The ECB kept interest rate at 0% premised on confidence in the current economic situation, limiting the chance of deploying QE in the near-term. In the last few trading hours, investors might take profit before the long weekend. Krungsri Securities suggests a Selective Buy strategy with a focus on stocks that are expected to release impressive results.

 

Investment Strategy: Selective Buy
Stocks that are forecast to report impressive 2Q19 earnings (PTTEP, EA, BGRIM, GPSC, CKP, TU, GFPT, TFG, CPALL, MTC, THANI, VGI, PLANB, MINT, VNT, WORK, MAJOR, JMT, PRM). Impressive dividends in 2H19 (INTUCH, ADVANC, KKP, TCAP, LH, QH)

 

Recommended stocks:
TU (BUY/ IAA Consensus TP Bt21.40 vs Bt19.4 close) earnings should grow in 2Q19 as lower tuna costs (-38% YoY) would lift GPM from 13.8% in 1Q19 to 16%. The positive growth momentum should continue into 3Q19. WORK (BUY/ TP Bt35 vs Bt30 close).

WORK is a turnaround and value stock. Earnings should continue to recover driven by the program reshuffling with improving ratings, especially for 10 Fight 10 program. WORK has ample cash in hand after authorities waived last two installment payments for its license. WORK may pay extra dividends or invest in new businesses to drive future growth.

 

KSS report today: Thailand Strategy (ECB’s clearly dovish stand suggests another round of global easing soon)

 

Today’s highlights:
ECB keeps rate at 0%, as widely expected, but signals future cuts and QE: The ECB has no concerns about the current economic situation, despite some slowdown. Economic stimulus measures will continue. The ECB has signaled it might cut rates or deploy QE, which could happen at the next meeting on 12 Sep.

Moody’s maintains Thailand’s rating at Baa1 but upgrades outlook to Positive from Stable, following Fitch Rating’s upgrade: Moody’s upgrade for Thailand outlook is premised on the nation’s solid financial status, with a positive view on the nation’s 20-year national strategy, especially the EEC project, which will improve private investors’ confidence and Thailand’s competitiveness in the long-term. Markets are now expecting S&P to announce an upgrade, which would attract funds into the Thai market.

US GDP data due tonight will influence Fed’s decision next week: The US is expected to report 2Q19 GDP growth data tonight, at +1.8%, softening from +3.1% in 1Q19. This could influence the Fed’s interest rate policy at the 30-31 July meeting. If GDP growth misses estimate, the Fed might cut an interest rate by 0.5%, which would be a positive surprise. If the result is in-line (2-3%), the Fed might cut an interest rate by 0.25%, which would not have a significant impact on fund flows.