Daily Strategy for Investors on January 6, 2020

Maybank Kim Eng (Maybank) has made an analysis for the trading session on January 6, 2020, pointing out some of the must-know events in the equity market as follows:

 

The SET on Friday narrowly swung. It gained in the morning session before declining in the afternoon. Energy stocks were heavily bought led by PTTEP, PTT, PTTGC driven by higher crude oil prices following elevated tensions in the Middle East.  The market closed at 1,594.97 (-1 point) with a trading value of THB61b (THB54b the previous day).

Foreign investors net bought Thai shares by THB174m. Institutional investors net bought by THB2.874b. There were net Long on SET50 Index Futures by 17,160 contracts.

 

Stock Picks & Trading Idea

PTTEP (TP THB140):  Positive momentum fuelled by tensions in the Middle East that pushed crude oil prices up in the short term, combined with 4Q19 earnings outlook likely to recover QoQ driven by sales volume expected to increase from full quarter recognition of sale volume of Malaysian fields and resumption of PTT’s gas intake from Bongkot as normal.

 

Investment Theme

The Middle East tensions boost crude oil prices and safe haven assets: The recent conflicts in the Middle East occurred after the US conducted an air strike at Baghdad International Airport in Iraq on Friday morning, resulted in the death of top military commander Qasem Soleimani, the commander of the Quds Force of Iran.

This has triggered war between the United States and Iran. Iraqi interim prime minister Adel Abdul-Mahdi has condemned the US air strike in his country as an aggression against Iraq. Mahdi in a statement called the attack a dangerous escalation that is likely to ignite war in Iraq and the region.

A red flag has been raised during a ceremony to honour Iran’s top general Qassem Soleimani in a declaration they are ready for war. Red flags in Shiite tradition symbolise both blood spilled unjustly and serve as a call to avenge a person who is slain. It is the first time in history that the red flag has been hoisted on top of the Jamkaran mosque in the Iranian city and comes after warnings of harsh retaliation against the US. President Donald Trump has been accused by his critics of plotting war crimes after issuing a threat on Twitter to strike ‘Iranian cultural’ targets.

‘Let this serve as a WARNING that if Iran strikes any Americans, or American assets, we have targeted 52 Iranian sites (representing the 52 American hostages taken by Iran many years ago), some at a very high level & important to Iran & the Iranian culture, and those targets, and Iran itself, WILL BE HIT VERY FAST AND VERY HARD,’ Trump wrote in a tweet on Saturday.

In the near term, this should push Brent crude oil price to swing in a range of USD65-72/bbl while speculation pressure added to safe haven assets like gold and safe haven currency like JPY and CHF may strengthen. We suggest investors closely monitoring how strong Iran’s retaliation would take.

Today’s SET’s support level is at 1580 and resistance at 1600. We recommend Trading Buy “PTTEP” to capture upside from rising crude oil prices. Gradually accumulate strong fundamental defensive stocks (BEM, GPSC, MTC), good dividend (BBL, LH, AP, TISCO). Be more cautious on ICT, retail, small to medium sized hospitals.

 

Big Issue
U.S. manufacturing slump worsens in Dec as ISM index falls to 10-year low to 47.2% last month from 48.1% in Nov, marking the fifth straight contraction. It’s softest reading since June 2009 – just as the U.S. was exiting the Great Recession.

 

Eyes on:
8-9 Jan: 2020 Budget Act consideration
Mid-Jan: 4Q19 earnings results announcement
21 Jan: Constitutional Court to rule on Future Forward Party case
20-21 Jan: BOJ meeting
23 Jan: ECB meeting
28-29 Jan: FOMC meeting
30 Jan: BOE meeting