Maybank Kim Eng Securities has made an analysis for the trading session on June 25, 2019, stating that the SET yesterday narrowly swung driven by strong buying pressure on refinery stocks TOP, SPRC and beverage MALEE, SAPPE and ICHI. However, selling pressure was spotted on OSP and STEC.
The index closed at 1,716.0 points (-1.1 points) with a trading value of THB51 billion (THB81 billion the previous day). Foreign investors continued to net buy Thai shares by THB4.1 billion. Institutional investors net sold by THB3.5 billion. There were net Short on SET50 index future by 7,597 contracts.
Investment Theme: US-Iran tensions escalating
Following the US banning 7 countries on importing oil from Iran, more than six tankers were on fire, including the US military drone attacked near the Strait of Hormuz, a strategically important waterway for the world’s oil transits, which lies at the heart of regional tensions. Over 18m bbl of crude a day transited the strait and LNG from Qatar.
Recently, The U.S. President Dobald Trump is ready to impose more sanctions on Iran, which Maybank expects to see more detail within this week. This situation is pressuring the crude oil price in the near term where the price may increase if Iran closes the strait of Hormuz. While at the OPEC meeting during early July, Maybank is optimistic that the meeting may extend oil production cut of 1.2m bbl at least until the end of this year. This will help limit the downside after revising down the forecast for global demand for oil to 1.2m bbl.
In summary, Maybank still prefer upstream oil sector to oil refinery and petrochemical sectors. And Maybank believes OPEC will maintain stabilizing the oil price if it sharply fall below Maybank’s forecast of USD60-70/bbl for Dubai crude oil. Accumulate PTTEP.
At the current level the SET trades at PER19 at 16.2x, close to the past 9 years average +1SD. Maybank believes SET should return to swing in a range of 1SD or at around 1690-1730 points. 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, S and TPCH.
1) PM Prayut to attend the G20 Summit in Japan.
Stock Pick and Trading Idea
GFPT: Accumulate, TP THB18.50. Maybank expects 2Q19 earnings to strongly grow by 40%YoY due to lower raw material costs while margin (%) growing by 15% with Mckey and GFN recovered well. Earnings tend to continue growing in 3Q19 due to broiler price tends to swing sideways upward (about THB36-37/kg in 2Q19) and it is a high season for exports. This will result in higher margin QoQ. The overall earnings should increase by 38% YoY to THB1.431b for the whole year.
SET struggling at resistance 1720 for 2 days, if Stochastic crosses down, likely a correction: The SET index saw a little momentum in the morning, driven by strong buying pressure on refinery stocks before gradually moving down and closed below 1720 for two days consecutively. Currently, the modified stochastic indicator remains in the overbought zone. If it crosses down below 80%, Maybank expects the index to enter a correction phase. The support levels of the day are 1690 and 1700. If it weakens and dips below 1710, lock profit because it may briefly correct.
1) With stocks, if rebounds, gradually take profit at 1720 and 1740. But if dips below 1710, lock profit.
2) Without stocks, wait and see until it corrects at the supports 1690-1700.
Maybank sets a support line at 1690 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.
2) US reports GDP growth on June 27.
3) G20 Summit June 28-29.
4) MPC meeting on June 26.
Technical Stocks :
JMT (16.30-16.50, Tp 17.50//18.00, Cut 16.00)
SAPPE (20.30-20.50, Tp 21.50//22.00, Cut 20.00)