Asia Wealth Securities has made an analysis for the trading session on July 8, 2019, stating that the SET on Monday would concern over the probability of Fed will not cut interest rates in this round as previously expected.
Thai Stock Market Today:
1) From the FED’s reaction, in the FOMC meeting, AWS expects the Fed may well cut interest rates by 0.25% from 2.50% to 2.25%. However, the market has a concern that the Fed may not lower the rate in this round, resulting in the cause of selling the stocks for profit-making.
2) BDI skyrocketed to 1,700 points, +52%, in a month. The rate standing above 1,300 points causes PSL and TTA to break even. AWS, therefore, recommends PSL (AWS TP Bt10.50) and TTA (AWS TP Bt6.60)
3) The Thai Baht appreciates in a range of Bt30.50-30.70 per US$ in line with the situation in which the fund inflows in both FDI and bond markets, as well as the stock market.
4) 2Q19 earnings of all limited companies are likely to weaken, however, it is in AWS’ expectation. It is expected that this issue will pressure the SET. We forecast the earnings of SET+mai should be at Bt230mn, down 9.5%YoY and 8.7%QoQ, compared to Bt254bn at the same period of last year.
5) PTTEP still has a marked 2Q19 performance out from energy sector with expected earnings of around Bt13.0-14.0bn.
6) AWS’ investment strategy is to buy on the stocks from power plant business (CKP, SSP, and WHAUP), as well as property sector (ANAN, ORI, and NOBLE) due to receiving benefits from the interest rate cut. Meanwhile, AWS recommends trading on PSL and TTA.
7) AWS notes that the sentiment of the stock market is still good. If the Fed’s interest rate drops by 0.25%-0.50%, it is normal to stimulate the economy. In contrast, if the interest rate cuts several times, it shows that the economy is likely to enter into a recession trend.
8) The SET is expected to be in a range of 1,705-1,760 points with recommending stocks of PSL and TTA.
9) Today, the SET is expected to be in a range of 1,722-1,745 points with recommending stocks of TU, PSL, and TTA .
Pick of the day: TU (Bt18.30; BUY; AWS TP Bt21.00)
AWS has a positive view on the analyst meeting on 5 Jul 19 and expect 2Q19 revenues to improve due to seasonal effect, but it may slightly weaken from Thai Baht appreciation. However, AWS expects the 2Q19 gross margin to improve to 16%, compared with 1Q19 gross margin at 14.9%, supported by lower tuna costs.
AWS expects 2Q19 net profit of Bt1.3bn. If deducting extra items by labor law around of Bt200mn, the 2Q19 operating profit is likely to be Bt1.5bn, up 7%YoY and 31%QoQ. AWS is maintaining a 2019 net profit forecast of Bt6.0bn, +87%YoY and AWS’ buy rating with a target price of Bt21.00 per share.
US stock market : Dow fell 43.88 points or -0.16%, while S&P 500 decreased 5.41 points or -0.18% and NASDAQ dropped 8.44 points or -0.10% due to US disclose the US employment information which came out quite well so that it reduces the expectation that the FED will cut the interest rate in the meeting in 30-31 July 19. AWS forecasts the FED will still cut the interest rate from 2.50% to 2.25% in this meeting.
Crude oil prices: WTI for August delivery rose 17 cents, or 0.3%, to close at USD57.51/barrel and Brent for September delivery also rose 93 cents, or 1.5%, to close USD64.23/barrel because the tension between UK and Iran which Iran seized British oil vessels after last Thursday, UK seized Iran’s ships in the strait of Gibratar. Moreover, OPEX has extended the time to reduce oil production for nine months at the end of March 2020 from at the end of June 2019.
Gold Price: The COMEX (Commodity Exchange) gold price for August delivery fell USD20.80, or -1.46%, to close USD1,400.10/ounce due to the dollar strengthening the DXYO market from 96.7 to 97.2 which is why FED may not cut the interest rate in the meeting between 30-31 July 2019.
Ocean freight charge : Baltic Dry Index (BDI) increase rapidly from 1,700 to 1,740 points, or +2.35%. From this point, AWS recommends speculation PSL (AWS TP Bt10.50), TTA (AWS TP Bt6.60).