Maybank Kim Eng Securities has made an analysis for the trading session on May 7, 2019, stating the SET on Friday moved in a narrow range driven by buying pressure on defensive stocks like mass transit and power plant stocks led by BEM, BTS, GPSC, and GULF.
The index closed at 1,679.0 points (-0.1 points) with a trading value of THB 43 billion, (THB 46 billion the previous day). Foreign investors continued to net sell Thai shares by THB1.7 billion, institutional investors net bought by THB 519 million. There were net Short on SET50 index future by 8,172 contracts.
Investment Theme: The week of domestic and global politics
This week, Maybank estimates the SET will be pressured by foreign political factors. On Monday, stock markets around the world faced significant selling pressure after Pres. Trump issued a plan to increase import tariffs on products worth USD 200 billion from 10% to 25% while preparing a plan to increase limits by USD 300 billion this Friday. This incident is somewhat Maybank and the markets are not expected.
However, Maybank suggests investors follow whether the Chinese side will insist on sending Liu He to meet Steven Mnuchin and Robert Lighthizer, 2 US representatives from the US side, to negotiate on May 8 or not. If the trip is canceled Maybank estimates that on May 10, there is a high chance that the United States will raise tariffs on imported products from China which will put pressure on world trade, the global economy in 2H19. And there is a high chance that the IMF will revise the world GDP forecast again and estimate that the currency value in emerging markets will return to a similar value in the previous year.
The SET is likely to be pressured through the baht value and the weakening of crude oil prices. The key support areas are estimated at 1,620 points +/-.
Recommend to avoid investing in Global play, shift to domestic consumption sectors and defensive stocks like mass transit and power plants. However, if Trump’s Tweet is threatening to make negotiations on 8 May between China and the US smoother and faster and if the results are positive, Maybanks estimate that the US may not increase taxation barriers or alleviate the limit. Global stock markets are expected to be technically rebound and the SET will return to swing in a range of 1,655 level.
Investment theme in May
SET index in May, fluctuating in the uptrend at 1,655 – 1,700 supported by
1) increasing the weight of Thai NVDR in MSCI
2) starting to see clarity of government forming
3) positive outlook on the US-China trade talks
4) The US-Middle East political problem will support crude oil prices.
Recommend hold cash no less than 40%.
1) US dollar weakened to 97.47.
2) Brent rebounded to maintain at USD 71.
Stock Pick & Trading Idea
Trading buy SABINA at target price at THB 28.7-35.00 (Non-rated): The share price dropped 30% from the end of last year in contrast with better fundamental factors. The company grew at an average 3yrs-CAGR of 30%. Maybank estimates its profitability should gradually rise driven by 1) OEM, 2) distribution channel expansion to respond to online marketing. Earnings this year are expected to continue growing due to new products launch with well received such as Doom series, Seamless fit. It also has strong financial status as net cash and high ROE of 19% (WACOAL 6.2%, Fashion Sector 5.7%, and Commerce sector 16%). Its dividend payout is as high as 100%.
SABINA is trading at PER of 20x. If based on earnings growth of 15-20% this year, the target price should be in a range of THB 28.7-35.00. More info in research today.
SET narrowly moves after failing to breakout 1680. But if succeeds, it may rally to 1700: The index is likely to further gain after it swung in the uptrend channel. But in the near term, it may correct after failing to surpass the resistance 1680, coupled with the MACD indicator is almost cross down the signal line again. The RSI also indicates the Bearish Divergence signal. This gives a negative signal. The first support level is 1665 and EMA200Day at 1655 as a key support. But if it breakout 1680-1682, the next resistances are 1690 and 1700.
1) Investors with stocks, if it breaks out the resistance 1680, let profit run to 1690- 1700. But if fails, take profit for next trading round.
2) Without stocks, If breaks 1680, follow buy. But if fails, wait to buy on dip at supports 1665 or 1655.
Maybank sets a support line at 1655 points and 1665 points while setting a resistance line at 1680 points and 1690 points
Keep An Eye On
1) Trade talks results announced on May 10.
2) Constitutional Court to rule on the constitutionality of the EC’s formula to calculate party-list MPs on May 8, at 9.30am. BOT meeting.