Daily Strategy for Investors on June 4, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on June 4, 2019, stating on the SET in May 30, 2019 declined by 53 points or about 3.1%. Institutional investors net sold Thai shares by THB 15 billion while foreign investors net bought by THB 3.6 billion, partly due to MSCI readjusting. Food and financial sectors (CBG, ICHI, MINT, AEONTS, MTC) slightly gained. Meanwhile, the global play stocks like electronics, petchem and energy stocks dropped more than 5-17% led by KCE, HANA, DELTA, PTTGC, IRPC and TOP.

Investment Theme:  SET to face high volatility in June driven by several factors
Maybank expects the SET in June to fluctuate according to 3 main factors:
1) Domestic, the government forming. The House of Parliament will open on June 5, where a total of 750 senators and MPs will vote for the Prime Minister. Initially, there is a high chance that General Prayut will be voted as the next prime minister. However, consider all the votes, whether it will be higher than 500 votes (including senators) or not? in order to ease the deadlock concerns.  Maybank has a neutral perspective on the issue and see how it can be established.
2) For foreign factors, the clarity of trade negotiations between the United States before the meeting between the 2 leaders of the United States and China at the G20 summit in Japan at the end of the month. Initially, both sides began to turn their backs against another and ready to escalate into the Tech war. The impact has spread to a large extent, affecting many of the world’s leading companies. If so, there is a chance that the US will continue to raise taxes. And if that happens, Maybank estimates EPS19 will have a downside at around 105x. However, keep eyeing whether the 12th negotiation before the G20 will take place or not? And
3) The OPEC meeting that may limit the downside of crude oil prices if the meeting agrees to extend the oil production capacity cut by about 1.0-1.2 m barrels until the end of the year.

Investment Theme
Maybank estimates the SET index to swing in a range of 1,585-1655 points. If based on fundamental, Maybank still recommends accumulating stocks in defensive and domestic play sectors led by EA, BEM and CPALL.

Big Issue
1) China raised tariffs on imported goods from US worth USD 60 billion. US-10 year bond yield continued dropping to 2.09%.
2) Thai BAHT strengthened to THB 31.3 against USD.
3) Gold price surged to USD 1,326/oz.

Stock Pick and Trading Idea
For low-risk takers, wait & see the clarity of the trade war that lacks of progression. With the index staying at an area of 1600 +/- points, for risk takers, wait to buy domestic play stocks like CPALL (target price THB 86), CK (target price THB 31).

Technical View
Swings around 1620 area, unclear trend, undecided: The SET index swung sideways throughout the morning before selling pressure took place in the afternoon. And the buy back pressure came in at the end of the session. The index swung and closed around the neckline 1620 for several days. So Maybank finds that it is making a decision. In the near term, if it breakout 1630, the trend will be positive. But if it dips below 1600, the negative trend will occur. In the short term, the index is pressured by the global crude oil price. So investors should be more cautious and eyeing on the key psychological support at 1600 which will lead the downside to 1580 and 1560.

Investment Strategy
1) With stocks, if rebounds intraday, take profit at resistances to reduce portfolio. But if dips below 1600, stop loss.
2) Without stocks, Wait until the index manages to hold above 1630, then speculate stocks.

Maybank sets a support line at 1600 points and 1610 points while setting a resistance line at 1630 and 1640 points

Keep an Eye On
1) OPEC meeting June 25-26. G20 Summit June 28-29.
2) Parliament to vote for PM on June 5.