Asia Wealth Securities (AWS) released an analysis for the trading session on March 27, 2020, indicating the essential events in the stock market as follows:
1) Dow Jones was up by 1,351.62 points (+6.38%), while WTI dropped by USD1.89 (-7.7%) in contrast with the gold price that rose by USD17.8 (+1.09%).
2) Major economic figures include a US Department of Labor’s report that the number of Americans applying for unemployment benefits for the first time, increasing by 3.28 million cases (Consensus estimates 1.5 million cases), higher than the previous record of 695,000 cases in October 1982.
3) The movement of gold and crude oil prices often reflects real fundamentals. Yesterday (26 March), the price of gold increased by USD17.8 per ounce (+1.1%), while the WTI crude oil price fell more than 8% after the US government announced the suspension of oil purchase plans for a strategic petroleum reserve (SPR) of 30 million barrels, with a budget of USD3.0bn. This was reflecting concerns over the weak economy and reduced oil consumption due to the spread of COVID-19 that was still at a critical level, as well as measures to cut production of OPEC and allies that will end next week. Those will make the oil market and crude oil more worried about the increased supply. Overall, AWS views it as a motive for investing in short-term risky assets as a result of the fiscal measures adopted by many countries today.
4) However, the SET Index dropped from as much as 31% at the end of 2019 and although the MPC reduced its GDP estimate in 2020 to -5.3% (previously expected +2.3%), Thai stock market was still able to stand in the frame of 1,000 – 1,100 points in the last 2 weeks in line with the technical viewpoint that if the SET can stand in the frame of 1,058 – 1,225 points, it is considered as a new round of short-term speculation.
5) Although it is difficult to predict when COVID-19 situation will end, AWS believes that the SET Index will gradually recover due to global economic stimulus measures. As a result, AWS sees this as an opportunity for investment. The groups that are slightly affected by COVID-19 are power generation business (with a high proportion of IPP and renewable energy), food sector, retail group and ICT group. However, AWS recommends to be careful in the groups that are much affected by COVID-19 which are energy sector, banking sector (bank and non-bank), electronics components, property sector (developing real estate and commercial real estate), and transportation group (land and air way, except airlines that are the most affected) and AWS recommends avoiding airline business, hotel business, and tourism-related business.
6) Crude oil prices dropped significantly so it will be a negative factor for the energy sector today (27 March). AWS believes that there will be short-term profit-taking after the energy sector index has increased more than 7% in the past 2 days, especially PTTEP (+13.5%) and PTTGC (+9.8%) which have increased significantly in the past 2 days.
7) TU which is a share in our theme investment, the share price dropped more than 12% yesterday (26 March), reflecting concerns over the COVID-19 situation affecting TU’s food business in the US. However, AWS estimates that it will not significantly impact net profit in 2020, even though frozen seafood sales have decreased from the adjustment of business strategies, but can compensate by increasing sales and exports of processed seafood worldwide because of stocking, although some European countries will close the city. In addition, Q Fresh business in Thailand has grown a lot from online orders and home delivery. Investment strategy, AWS sees only negative factor affecting short-term investment psychology, it still have a positive view on TU, recommend “BUY” with a target price of Bt18.40.
Today, AWS expects the SET to be within the range of 1,076 – 1,106 points (with support at 1,090, 1,076 and 1,059 points and resistance levels at 1,106 1,120 and 1,136 points).
1) Antiviral stocks….COVID-19, AWS chooses TU (TP Bt18.40) GFPT (TP Bt12.00) CPF (TP Bt33.00) TFG*(TP Bt5.35) BJC*(TP Bt48.00) CPALL (TP Bt85.00) and TQM*(TP Bt69.00).
2) Stocks in the power plant group, AWS chooses BGRIM (TP Bt59.00) GULF*(TP Bt164.00) and GPSC (TP Bt82.00).
3) Accelerate the disbursement of the government budget in 2020. AWS chooses CK (TP Bt22.00), SEAFCO (TP Bt7.30), WHA (TP Bt4.20) and KKP (TP Bt80.00).
4) Government stimulus measures. AWS chooses AOT (TP Bt79.00) CPALL (TP Bt85.00), BEM (TP Bt12.50) and HMPRO (TP Bt19.00).
5) High Dividend. AWS chooses KKP (Div.Yld. 11.3%) QH (Div.Yld. 8.7%) DIF (Div.Yld 8.2%) TISCO (Div.Yld. 7.9%) BAFS (Div.Yld. 5.6%) RATCH (Div.Yld. 5.5%) and ADVANC (Div.Yld. 4.8% ).