Asia Wealth Securities (AWS) released an analysis for the trading session on June 2, 2020, indicating the essential events in the stock market as follows:
Investment Overview Today – AWS expects the SET to fluctuate and may have a chance to take a rest in the short-term. The factors that still support the market are from strong economic reporting in May, appreciation of Thai Baht, and crude oil prices remaining at a high level. However, the SET has continually increased until now with trading PER at 17.6x, causing upside to be limited due to valuation risk factors and the uncertainty from the U.S. and China dispute.
Economic statistics report in May rebound – The gradual increase in confidence in the overall economy is caused by the May statistic report showing signs of recovery. The U.S. manufacturing index for May stood at 43.1 points, up from 41.5 points in April, due to new orders and employment, while the Purchasing Managers’ Index (PMI) of the US manufacturing sector in May stood at 39.8 points, up from 36.1 points in April. In the Eurozone, the Purchasing Managers’ Index (PMI) in May was at 39.4 points, up from 33.4 points in April.
U.S. economic data must be watching this week – The final services Purchasing Managers’ Index (PMI) in May, The non-manufacturing index from the U.S. Institute for Supply Management (ISM), weekly jobless claims, and trade balance in April.
Follow the ECB meeting on 4 June. It is expected that a negative interest rate is not used yet – The European Central Bank (ECB) sets a meeting on 4 June. AWS expects the ECB to maintain the policy interest rate at 0%. There is no plan to use the negative interest rate. In addition, AWS believes that the ECB will have additional stimulus measures and the issuance of EUR500bn QE.
Crude oil prices are standing high in response to the possibility that OPEC will extend production capacity – An interesting issue is the extension of production cut of 9.7 million barrels per day at least 3 – 6 months from the end of June 2020 to replace the original resolution to reduce production of only 8 million barrels per day between July – December 2020. The OPEC+ schedules a meeting on 4 June (postponed from 9 – 10 June).
Global trade issues return to pressure the investment again – Currently, the Chinese government ordered large state-owned companies to suspend purchasing orders for the U.S. agricultural products, including soybean. AWS forecasts that this will affect the China trade agreement Phase 1 with the U.S in early 2020, from this point, it will be the factor that pressures the investment.
Technical View – AWS expects the SET index to move in a range of 1,342 – 1,360 points (with support at 1,347, 1,342 and 1,334 points and resistance levels at 1,354 1,360 and 1,368 points). The recommended stocks are CK, PTG, TCAP, CPN, and TRUE.
1)Recovery of crude oil price – PTTEP, PTT, TOP, BCP, SPRC, and PTTGC
2)Accelerate the disbursement of government investment budget- CK, STEC, SEAFCO, PYLON, and TASCO
3)Stocks that benefit from entering rainy season – BCPG, BGRIM, CKP, GPSC, and EASTW
4)Stocks that benefit from government measure – ADVANC, BTS, BEM, CPF, CPALL, BJC, CRC, CPN, PLANB, HMPRO, OSP, and CBG
5)Long-term cumulative shares (DCA) – ADVANC, AOT, BDMS, BEM, CPALL, DIF, and HMPRO
6)SSFx target stocks – PTT, PTTEP, BJC, CPALL, AOT, GULF, EGCO, INTUCH, ADVANC, BAM, and BDMS