Maybank Kim Eng (Maybank) released an analysis for the trading session on July 31, 2020, indicating the essential events in the stock market as follows:
The Thai bourse yesterday moved down aligning with regional markets, pressured by fears over the global economic slowdown as Germany reported 2Q20 GDP at -10.1% QoQ. The SET index closed at 1,315.74 (-22.61 points) with a trading value of THB67b (THB56b the previous day). Foreign investors net sold Thai shares by THB1.962b. Institutional investors net sold by THB1.459b. There were net Short on SET50 Index Futures by 9,013 contracts.
Stock Picks & Trading Idea
GLOBAL (Strategic TP THB19): 2Q20 net profit beat consensus by 33%, driven by a rise in gross profit margin to 23.8% (new record high). Maybank expects the GPM should maintain a high level in 2H20, coupled with sales recovering after the lockdown eased.
Despite weak global 2Q20 GDP, expecting a year’s bottom: The impact of COVID-19 epidemic has resulted in global economic growth in 2Q20 significantly contracted. Germany yesterday reported 2Q20 GDP at -10.1% QoQ (market expected -9%) while the US reported 2Q20 GDP at -32.9% QoQ (market estimated at -34.5%), which is the largest contraction since the record in 1947, pressuring the US stock market to contract -0.85%.
However, Maybank expects the numbers to be the lowest of the year and expects to recover in 3Q20. (Bloomberg consensus estimates 3Q20 US GDP to rebound +18% QoQ).
As for Thailand’s economic growth, the Fiscal Policy Office (FPO) has lowered Thai GDP forecasts this year down to -8.5% YoY and estimate that 2Q20 will be negative by more than 10% YoY, which is considered close to ours and the Bank of Thailand’s forecast that this year’s GDP should be -7.3% and -8.1% YoY and will be the year’s bottom like that of the US.
The Thai economic data will be reported on 17 Aug, so it’s only a short-term pressure factor. And Maybank believes that in the next period, the market is likely to swing upward as the overall Thai economy is gradually recovering in the second half.
Investment Strategy: Today, the SET is expected to move sideways in a range of the support at 1,306 and resistance at 1,340 points. Focus on stocks with strong earnings recovery. Today’s ATO top pick stocks are “GLOBAL, JMART, DOHOME”.
US president Donald Trump wants the US presidential elections to be postponed, citing fears over cheating by using mail-ins.
31 July: China PMI Manufacturing and Services, Eurozone 2Q20 GDP, Eurozone CPI (July)
31 July: Bank of Thailand reports monthly economic updates
Support : 1307/1300
Resistance : 1327/1335