Maybank Kim Eng Securities has made an analysis for the trading session on May 17, 2019, stating the SET on Thursday continued experiencing a selloff driven by selling pressure on power plants stocks GULF, BGRIM, RATCH and financial KTC, SAWAD and MTC.
The index closed at 1,614.7 points (-6.5 points) with a trading value of THB 59 billion, (THB 49 billion the previous day). Foreign investors net sold Thai shares by THB 1.97 billion, institutional investors net sold by THB 913 million. There were net Short on SET50 index future by 7,219 contracts.
Investment Theme: Despite SET lacking catalysts, EYG becomes more attractive
The SET still lacks positive catalysts while the trade war issue remains unclear and may take a month until the two leaders from US and China to meet in Japan in late June.
For domestic factors, political issue becomes a concern again regarding the government formation which may see instability in the long run. Maybanks suggest investors keep updating the political stance of the Democrat and Bhumjaithai parties. However, in terms of valuation, -4.1% drop in the SET index or 70 points from the early this month has led to the earnings yield gap of the stock and bond markets rising to maintain above the 10 years average at 4.27% (10 year AVG is 4.25%).
So, strategically, at the SET index of 1600 points, it is a level that high-risk takers can gradually accumulate fundamental stocks with strong earnings prospects, limited downside such as PTTEP (Target price at THB 150+8) EA (Target price at THB 57.75) as 2Q19 earnings are forecast to hit record high, driven by the last batch of wind farm of 80MW that supplied electricity to the system since April 13, the total production increased by +14% QoQ.
This week, SET should swing in a range of 1,620-1,655 points. Recommend investors holding cash no less than 40%.
Finance Minister believes GDP this year still grows 3-4%. Brent continued rising to USD 72.7.
Stock Pick & Trading
Given the aforementioned foreign factors pressuring the investment sentiment, low-risk takers should halt your investment to wait for the clarity. For high-risk takers, accumulate PTTEP, (THB 150+8 from Murphy). 2Q19 earnings are forecast to improve QoQ alongside the Dubai crude oil price QTD rising 11% QoQ while gas price steady QoQ. Sales volume should increase by 3-4% QoQ, mainly from South Bongkot project readies to resume operation after the maintenance shutdown.
If dips below 1620, reversal double top pattern confirmed: The index dipped below the neckline support at 1620 driven by selling pressure on energy, telecom, and property sectors. The index is forming a reversal double top pattern leading to more downside. Even though there was a rebound in the afternoon, but not significant. Today, if it rebounds intraday, sell stocks to reduce portfolio. The long term downtrend target is set at 1560 points, with supports at 1600 and 1580 along the way.
1) Investors with stocks dip below 1629, stop loss. Use the low 1604 as a stop loss spot.
2) Without stocks, wait and see until the trend is clear or strong rebound.
Maybank sets a support line at 1580 points and 1604 points while setting a resistance line at 1626 points and 1638 points
Keep an Eyes On
Bhumjaithai party announces its stance on May 20.