Asia Wealth Securities (AWS) released an analysis for the trading session on August 4, 2020, indicating the essential events in the stock market as follows:
Investment Overview Today – Domestic and international economic numbers report was better than expected which will be a supporting factor for investment, but AWS looks at it as a short-term only. The market is still exposed to risks from international political problems, delays in issuing stimulus measures both Thailand and the U.S., including concerns about the COVID-19 situation in foreign countries. Issues that are worth following are the announcement of the earnings results of listed companies and the Monetary Policy Committee’s meeting (MPC) tomorrow (5 August). AWS investment strategy is to focus on domestic plays and defensive stocks such as HMPRO, BJC, CBG, TTW, EASTW, BCPG, CKP, GPSC, DIF, INTUCH and EGCO, including expected strong 2Q20 earnings which are ASIAN, CPF, TU, OSP, TASCO, STA, STGT, COM7, PTG, BAM, JMT and GULF.
MPC meeting tomorrow, AWS expects the BoT to maintain the interest rate at 0.5% – AWS estimates that the BoT will keep the policy rate unchanged at the MPC meeting on 5 August, due to (1) The current Thai policy interest rate at 0.5% which is considered to be very low (2) The use of many financial and fiscal tools in the past to help reduce the effects of the COVID-19 pandemic, including the stimulation of the domestic economy (3) The easing of the CCSA, measures to allow businesses to resume normal operations, and (4) The BoT is still changing the Bank of Thailand Governor, causing AWS to believe that there will be no change in monetary policy in the short-term. However, the risk factors from the delay of government stimulus measures may be a factor that causes the BoT to cut interest rates by 0.25%.
BoT reported the business confidence index in July increased – BoT reported the business confidence index in July at 42.9 (June was 38.5), increasing for 3 consecutive months, with the business sentiment index improving almost every business but still below 50 in every business sector which reflects the confidence that remains low but there are signs of improvement. While in the next 3 months, the business confidence index stood at 48.6, increasing from June at 47.0.
The economic data for the US and Europe are better than expected- the U.S. survey revealed that the U.S. manufacturing index in July stood at 54.2, higher than expected. (Highest since March 2019) and up from 52.6 in June. While Europe, the PMI Index for the final procurement of manufacturing in July stood at 51.8, increasing from June – July at 47.4 and 51.1 respectively. The Positive factors that came from many countries have relaxed the lockdown. Including the non-agricultural employment numbers of the U.S. in July which is expected to increase 1.36 million positions and the unemployment rate is expected to decrease 10.7% by the U.S. Department of Labor which have the scheduled for release on Friday (7 August)
Still have to follow the U.S. stimulus measures – The negotiations between the Congress and the White House about issuing new stimulus measures which include the extension of the Unemployment Assistance Program which expired at the end of July 2020 is still a worthwhile issue, especially the conflicting opinions about the amount of money to help unemployed.
The important economic statistics – The factory orders in June, The private employment numbers for July from ADP, The trade balance in June, The purchasing managers index (PMI) for final service sector in July from Markit, The service sector index in July from ISM, The number of weekly jobless claims and the inventory reserve for wholesale trade in June.
Technical View – Today, AWS expects the SET Index to move between 1,314 – 1,333 points. (Support at 1,320 1,314 and 1,306 points and resistance at 1,327 1,333 and 1,341 points). The recommended stocks are CPALL, RS, STA, TASCO and GLOBAL.
1) Benefit from the stimulus package – CPALL, HMPRO, BJC, OSP, CBG, TTW and MTC (Phase 1 stimulus package), AOT, AAV, BA, ERW and MINT (Tourism stimulus package), CK, BEM, STEC, SEAFCO, PYLON and TASCO (disbursement of government budget)
2)Stocks that benefit from entering the rainy season – BCPG, BGRIM, CKP, GPSC and EASTW
3)Dividend Play – KKP, TISCO, QH, LH, ORI, NOBLE, DIF, INTUCH, HANA, EASTW, TTW, EGCO and RATCH
4)Long-term cumulative shares (DCA) – ADVANC, AOT, BDMS, BEM, CPALL, DIF and HMPRO