Daily Strategy for Investors on March 18, 2020

Asia Wealth Securities (AWS) released an analysis for the trading session on March 17, 2020, indicating the essential events in the stock market as follows:

 

Investment Ideas:

1) Dow Jones rose 1,048.86 points (+5.20%), WTI crude oil price dropped USD1.75  (-6.1%) and gold price increased USD39.3 (+2.64%).

2) The recovery of the US Stock Market was in response to stimulus measures after the Fed announced to repurchase USD500bn bonds yesterday (17 Jan) apart from the previous announcement of injecting USD1.5tn into the banking system last week, together with increasing the type of securities for buying Fed bonds.

3) The US Office of the Comptroller of the Currency (OCC), an independent bureau within the US that regulates all banks and federal thrift institutions under the federation, is considering relaxing its rules related to leveraged lending that were introduced in 2013 to increase liquidity in the market.

4) Crude oil prices continued to decline due to concerns about the increase in supply after Saudi Arabia and Russia have plans to increase production in April, while the  short-term demand is affected by COVID-19. Although AWS expects the Chinese oil demand to begin to recover at the level of 9.3 to 9.5 million barrels per day (MBD) due to the COVID-19 situation in China will begin to resolve, the pandemic continues to invade in many countries around the world. AWS expects that in the 6M20 period, the oil demand will be affected by 2-3 MBD and will reduce the total oil demand in 2020, decreasing from 2019 at 100.83 MBD. This will be a negative factor for the upstream energy group (PTT and PTTEP). The refinery benefits only a small amount. Even before this, the GRM will recover from the reduction of export prices of crude oil in countries in the Middle East. However, the current GRM declined to reflect the weak fundamental demand for crude oil.   

5) AWS studies historical data regarding the SET decline in the year 2007 – 2008, it was found that in 1 year, the index dropped from the highest point of 924.70 points to 380.05 points or 58.9%, while in the year 2019-2020, the index was down from the highest point at 1,748.15 points to the lowest point at 969.08 points or 45%. Currently (17 Mar), SET Index closed at 1,035.17 points, down from the highest point in 2019 by 41%. AWS sees that if the index falls by 59% the same as in 2008, the SET Index can go down to 718.49 points. In addition, AWS considers the shares in SET100 that dropped in this round than the decline in 2008, AWS found that there were 8 stocks as follow: PTTEP, SCB, KBANK, BBL, MBK, CENTEL, GFPT, and BEC. In the statistics view, AWS expects all 8 stocks to have a small downside risk in the decline.

6) The stock market has adjusted the Circuit Breaker criteria from 2 levels to 3 levels. Level 1: stops trading for 30 minutes when the market drops by 8%. Level 2: stops trading for 30 minutes when the market drops by 15% and level 3: stop trading for 60 minutes when the market drops by 20% and adjust the ceiling and floor to +/- 15% both SET, mai, and TFEX to reduce the fluctuation of the current market conditions. It will be effective from 18 March 2020 and no later than 30 June 2020.

 

AWS investment strategy recommends investing in the theme investment from the least affected stocks from COVID-19 (antiviral stocks….COVID-19) and high dividend shares.

AWS expects the SET to move within the range of 1,013 – 1,057 points (with support at 1,024 1,013 and 991 points and with resistance at 1,046 1,057 and 1,080 points).

 

Theme Investment:

1) Anti-Virus. COVID -19, AWS chooses TU (TP Bt18.40) GFPT (TP Bt12.00) CPF (TP Bt33.00) TFG*(TP Bt5.35) BJC*(TP Bt48.00) CPALL  (TP Bt85.00) and TQM*(TP Bt69.00) *IAA Consensus 

2) Accelerate the disbursement of the government budget in 2020. AWS chooses CK (TP Bt22.00), SEAFCO (TP Bt7.30), WHA (TP Bt4.20), and KKP (TP Bt80.00). 

3) Government stimulus measures, AWS chooses AOT (TP Bt79.00) CPALL (TP Bt85.00) BEM (TP Bt12.50) and HMPRO  (TP Bt19.00). 

4) Global trade has eased, AWS chooses CPF (TP Bt33.00). 

5) Interest rates cut. AWS chooses ORI (TP Bt9.00), SPALI (TP Bt20.00), MTC (TP Bt73.00), KKP (TP Bt80.00), and TISCO (TP Bt112.00). 

6) High Dividend, AWS chooses KKP (Div.Yld.11.3%), QH (Div.Yld. 8.7%), DIF (Div.Yld 8.2%), TISCO (Div.Yld. 7.9%), BAFS (Div.Yld. 5.6%), RATCH (Div.Yld. 5.5%) and ADVANC (Div.Yld. 4.8%).