Maybank Recommends 6 Strong-Fundamental Stocks able to Cope with Market Conditions

Maybank Kim Eng has stated that the SET yesterday plunged on fears over COVID-19 outbreak out of China, expecting to hurt the global economy. The SET index closed at 1,435.56 (-59 points) with a trading value of THB76b (THB56b the previous day).

 

Investment Theme: SET EPS is likely to be cut, look for a good entry

The Thai bourse yesterday sharply plunged by 60 points or -3.98%, mainly driven by 1Q20 earnings outlook may be weaker than expected hurt by numerous factors ranging by COVID-19 outbreak that increasingly spread out of China. Countries in radar include South Korea, Italy and Iran. It is forecast that the impact may spread wider covering several industries.

Furthermore, the weak domestic economy is also hit by many negative factors such as the drought that is more severe than ever, and the delayed budget bill. These are factors to be considered in downgrading the market EPS forecast. Initially, the SET EPS for 2020 is likely to be cut down to about THB90/share. If compared with the current SET index, forward PE is 15.9x, close to the average 10 PE + 1.0SD. So, investors may look for a good entry point to gradually accumulate stocks at a lower level.

Moreover, if compared returns between the SET and the Thai bond market (earnings yield gap), it is currently at 5.7% vs the earnings yield gap of 10 years +2.0SD, this is interesting as the risky market offers higher returns than the safe-haven markets. All in all, this is another factor to consider that the stock market at this level is interesting for investment.

Investment Strategy:  Maybank estimates the support level of the SET index today at 1420 and resistance at 1450. Maybank recommends investors to accumulate stocks that can cope with high-risk market conditions (GULF, INTUCH, BTS, SAWAD, TU, RBF).