Asia Wealth Securities (AWS) released an analysis for the trading session on May 21, 2020, indicating the essential events in the stock market as follows:
Today’s Investment Overview – AWS remains positive on the SET. AWS believes the SET will remain in positive territory from (1) The BoT lowering the policy interest rate to 0.5% (2) Worries about the market valuation beginning decrease given the expectation of the recovery of COVID-19 in 2H20, resulting in the share price starting reflecting the recovery in FY2021 earnings, and (3) The increase in crude oil prices being a factor supporting the investment in the energy sector. For Foreign market, the Fed revealed in its latest meeting report that they are still worried that the COVID-19 will affect the overall economy. However, the stock market responded positively due to Fed’s assertion of the stimulus measures and an increase in liquidity to the market.
The MPC resolved to reduce the policy interest rate by 0.25% to 0.5% – The MPC has a 4 to 3 resolution to reduce the policy interest rate by 0.25%, resulting in the current policy rate lowering to 0.50% due to (1) Economic outlook (2) Lower-than-expected inflation numbers, and (3) The baht’s appreciation. AWS estimates that the policy rate will be stable at 0.50% for the rest of the year. Moreover, all economic stimulus measures will reduce the possibility of interest rate cuts. For stocks that benefit from lower interest rates, AWS chooses MTC SAWAD, KKP, TISCO, BAM, and DIF as well as the power plant sector according to AWS theme investment.
The Central Bank of China maintained the LPR interest rate as expected – The Chinese Central Bank (PBOC) has announced a one-year LPR of 3.85% and the 5-year LPR at 4.65%.
Most Fed Minutes shows worries about economic impacts from the COVID-19. – The Fed revealed the minutes (28-29 April) in the negative perspective. There is still a chance that the COVID-9 is likely to return in the second round, while there is a positive perspective from economic activities that might recover quickly if the spread is reduced enough for making the household and business sectors more confident.
AWS believes that there is a chance to see a negative interest rate in the U.S. if the COVID-19 situation is not resolved. – The Fed committee estimates that 2Q20 GDP will drop dramatically and concerns about the temporary termination of employees may become a permanent termination. At this meeting, the FOMC resolved to keep interest rates at 0.00-0.25%. However, AWS believes that if the COVID-19 situation in the U.S. cannot be controlled, there is a chance that AWS will see the Fed using a negative interest rate (Fed Funds Future higher than 100 during April 2021).
Crude oil prices continue to increase after reporting oil reserves in the U.S. decreased – The EIA reported a decrease of 5 million barrels of crude oil (ending 15 May), down for 2 consecutive weeks. Meanwhile, crude oil reserves in Kuching, Oklahoma (WTI delivery point) dropped 5.5 million barrels last week.
Technical View – AWS expects the SET index to move today in a range of 1,313 – 1,332 points (with support at1,318 1,313 and 1,302 points and resistance at 1,327, 1,332 and 1,342 points). The recommended stocks today are KBANK, SAWAD, TRUE, KCE, and SGP. (Please follow details in Technical Express)
1)Stocks which obtain the benefit from cutting the interest rate – MTC, SAWAD, KKP, TISCO, BAM and DIF
2)Stocks which obtain the benefit from relaxing lockdown phase 2 – AWC, CRC, CPN, BTS, BEM, HMPRO, GLOBAL, DOHOME, M, AU and COM7
3)Recovery of crude oil price – PTTEP, PTT, TOP, BCP, SPRC and PTTGC
4)Stocks that benefit from entering rainy season- BCPG, BGRIM, CKP, GPSC and EASTW
5)Stocks that benefit from government measure – ADVANC, BTS, BEM, CPF, CPALL, BJC, CRC, CPN, PLANB, HMPRO, OSP and CBG
6)Long-term cumulative shares (DCA) – ADVANC, AOT, BDMS, BEM and DIF
7)SSFx target stocks – PTT, PTTEP, BJC, CPALL, AOT, GULF, EGCO, INTUCH, ADVANC, BAM and BDMS