Maybank Kim Eng Securities has made an analysis for the trading session on June 10, 2019, stating on the SET Friday last week swung in a narrow range, driven by strong buying pressure on media BEC and WORK while global play stocks are recovering such as SPRC, TOP, and PTTGC.
The index closed at 1,653.5 points (+0.1 points) with a trading value of THB35b (THB49b the previous day). Foreign investors net sold Thai shares by THB293m. Institutional investors net sold by THB645m. There were net long on SET50 index future by 2,707 contracts.
Investment Theme: Overall investment factors see more relaxed
Last month, the stock markets worldwide experienced a sell-off with a significant profit-taking pressure due to escalated US-China trade war that hurt the economy in the long run. This has led to the long term US bond yield declined, resulting in an inverted yield curve. The markets fear of the recession and caused a pressure on the long term investment.
However, in the near term, the world’s leading central banks FED and ECB have adjusted their stance to become more dovish, presenting an opportunity for an interest rate cut. As a result, the US dollar has weakened, supporting the investment in the emerging markets.
Another mild positive factor is that the US president Trump has cancelled tariffs hike on imported products from Mexico while Chinese leader Xi Jinping told the Economic Forum that China and the US relationship remains sound despite the 12th trade negotiation has not taken place yet. However, this signals that there is a chance both sides will come back to meet and talk again.
Another positive factor for crude oil prices is that Saudi Arabia is preparing to extend its production cut by 1.2m bbl further.
In summary, Maybank has a positive view on the dovish approach, OPEC meeting in the near term, with a neutral view on trade negotiations in the mid term.
Maybank estimates the SET index this week to swing in a range of 1,645-1670 points. Maybank still recommends accumulate PTTEP (global play) and speculate domestic play stocks led by WORK and CPALL.
1) Thai Baht continued strengthening to THB31.2 vs USD.
2) US president Trump cancelled tariffs hike on Mexico imported products.
Stock Pick and Trading Idea
WORK : Initiation, Trading Buy, target price at THB25: The share price plummeted by 75% from its peak, reflecting concerns about its earnings already. Maybank expects it has bottomed out and will recover to post earnings of THB527 million, a 53% growth, driven by new programs such as 10 fight 10, present box and others. Content cost declined by more than 10%, Remedial measures, amortization, and MUX, resulting in gross margin (%) returning to expand by 45% from 38% in the previous year. Maybank estimates the target price based on forward PER 21x on average 12 months back, and it is THB25.
If closes above 1653 (EMA200 Day), new cycle of uptrend: The SET index managed to steadily gain despite a correction intraday, it can hold above the area of 1653 (EMA200 Day). In the near term, it still has a strong momentum. If it can hold above the resistance 1653, it should swing in a range of 1653-1675. But if it weakens but still holds above 1645, accumulate stocks when weakens because it is only a correction before it regains in the next phase.
1) With stocks, hold stocks if it manages to maintain above 1645, take profit at resistance 1665 and 1675. If dips below 1645, gradually lock the profit.
2) Without stocks, if weakens to test the support 1645, accumulate stocks for trading.
Maybank sets a support line at 1630 points and 1645 points while setting a resistance line at 1665 and 1675 points
Keep an Eye On
OPEC meeting June 25-26. G20 Summit June 28-29.