Daily Strategy for Investors on June 24, 2019

Maybank Kim Eng Securities has made an analysis for the trading session on June 24, 2019, stating on the SET on Friday experienced high volatility as the big caps attracted to correct led by PTT, PTTEP, and GULF. Buying pressure was continued on SMID caps like ICHI, DOD, and JUBILE.
The index closed at 1,717.1 points (-0.6 points) with a trading value of THB81 billion (THB75 billion the previous day). Foreign investors continued to net buy Thai shares by THB4.6 billion. Institutional investors net sold by THB2.9 billion. There were net Short on SET50 index future by 9,865 contracts.

Investment Theme: SET to swing in a range of 1,690 – 1,730 on trade talks clarity
Since the beginning of June, the global equity markets including the Thai bourse have sharply gained to reflect the likelihood that the US policy interest rate may be cut in 3Q19. SET index gained +6%, driven by foreign investors net bought of THB31b. As of now, the SET index trades at the PER19 of 16.2x, close to the past 9 years average +1SD.
From now on, Maybank expects that the SET index may return to move in a range of 1SD or around 1,690-1,730 points awaiting the results of the trade talks between the US and China on this weekend.
Initially, Maybank has a neutral view on the trade talks results. Maybank estimates that the US may cancel or postpone the tariffs hikes on the USD300b imported goods to avoid tech war. Maybank also forecasts that the US Fed would cut interest rate once in 3Q19 and the SET index target is set at 1,750 points +/-.
For domestic factors, keep an eye on the MPC meeting on June 26. Maybank expects the meeting should keep interest rate unchanged and cut GDP growth forecast from 3.8% (Maybank forecasts 3.2%).
Investors are recommended to watch out for the strong Thai baht and the new government’s economic stimulus measures such as minimum wage hike and others.

Investment Theme
Maybank estimates the large-cap stocks may enter a correction period. This gives it a chance to speculate mid-caps, recommend “HOLD” PTTEP, BEM, CPALL and speculate TRUE, WORK, S and TPCH.

Big Issue
1) Commerce Ministry reported exports contracted by -5.79% in May. As of 5M19, exports growth was -2.70%, trade surplus of USD731m.
2) Giant explosion rocks largest refinery complex on the US East Coast sends gasoline prices higher by 3.4%.

Stock Pick and Trading Idea
PTTEP: Accumulate, target price at THB150, added by 3 upsides; THB8 from Murphy, THB1 from Partex and THB3 from Mozambique FID, totaling THB162/share. The MZ LNG project will help boost PTTEP’s sales volume by 22 KBOED for 25 years after reaching full production capacity in FY2025. That represents a 5% upside of sales volume in 2025. Based on average LNG price of USD6.8/MMTU, the sales volume of 12.2 MTA, and WACC of 10.3%, Maybank estimates the average profit of THB4.1 billion pa, and addition value to PTTEP by THB3 per share. Fundamentally, PTTEP still growing 5-10% YoY, better than Global plays peers. Maybank expects it will begin recognising revenue from Murphy and Partex in 3Q19, with volume increasing over 7.5% and 20% in 2020.

Technical View
SET begins weakening after hitting resistance 1720, if Stochastic crosses down, likely a correction: The SET index saw a little momentum in the morning before gradually moving down after failing to break out the resistance of the uptrend channel at 1720.
Currently, the modified stochastic indicator remains in the overbought zone. If it crosses down below 80%, Maybank expects the index is entering a correction phase. The support levels of the day are 1710 and 1700. If it weakens but holds above 1710, it may rebounds intraday. But if it dips below 1710, lock the profit.

Investment Strategy
1) With stocks, if rebounds, gradually take profit at 1720 and 1740. But if dips below 1710, lock the profit.
2) Without stocks, if weakens to test the support 1710 and holds, accumulate stocks.

Maybank sets a support line at 1700 points and 1710 points while setting a resistance line at 1720 and 1740 points

Keep an Eye On
1) Trump may intensify sanctions on Iran. US reports GDP growth on June 27. G20 Summit June 28-29.
2) MPC meeting on June 26.