Low Exposure Stocks to COVID-19 Start to Outperform the Market, Says Maybank

SET Index opened the day with a jump of 30 points in the same direction of the regional market this morning after central banks started to introduce stimulus packages to fight the coronavirus (COVID-19) outbreak.

 

Maybank Kim Eng points out today’s investment theme, saying that stocks with low exposure to the Covid-19 outbreak start to outperform the market.

The COVID-19 outbreak, originated from China and spread to all over the world, is directly and indirectly affecting a variety of industries. Currently, there are more than 230,000 people infected and 9,300 deaths.

The spread of COVID-19 is considered to be accelerating significantly, especially in European countries such as Italy, Spain, Germany and France. And in the United States, the number of confirmed cases at this time has already surpassed 10,000. This has become a major global problem causing the global economy to slow down. And if it is escalating further, it may lead to the global recession.

 

For the stock market, which is considered a good indicator of the future economic trends, it is likely that the stock markets around the world have been hit hard. Among them, the Thai stock market has fallen by more than -34% vs the beginning of the year. It is currently trading at the 10-year average PE of – 1SD to -2SD, which is considered to be a response to some bad factors. While the positive side is the central banks around the world and the government have urgently launched economic stimulus measures, both financial and fiscal policies, aiming to revive the economy in the medium term.

Therefore, given the SET index trading at a current level, the market may begin to see strong buying in some industry sectors. Maybank believes that the industry that is not much affected by COVID-19 will have a chance to recover first, such as telecommunications, electricity, food, and retail, while those that are heavily affected such as tourism, energy, banks may have to wait for the outbreak of COVID-19 to slow down more.

 

Maybank estimates the support level of the SET index today at 1000 and resistance at 1080. For low-risk takers and VI, Maybank recommends to gradually accumulate shopping list stocks when market panic (CPALL, AOT, ADVANC, BEM, TQM). For high-risk takers, use only 20% of capital to speculate OSP, CPF and BAM.