Krungsri Securities (KSS) released an analysis for the trading session on August 5, 2020, indicating the essential events in the stock market as follows:
SET Index gained 10 points (+0.7%) to close at 1,331 in Bt55b turnover, supported by better than-expected China, EU and US Manufacturing PMI data, and speculation in several sectors: Tourism (MINT, CENTEL), Transportation (AOT), Finance (KTC, MTC, SAWAD) and Energy (GULF, GPSC, ESSO, SPRC). Foreign investors were net sellers of Thai shares at Bt1,824m and bonds at Bt684m, but net long TFEX SET50 at 3,839 contracts.
KSS has a neutral-positive view on the market, expecting the SET Index to rise to test 1,335 – 1,340 resistance level. In the US, Congress and White House have resumed talks on the US$1tn pandemic rescue deal. The US reported factory orders grew 6.2% in June, and oil prices have rebounded. However, uncertainties over 2Q20 results and the technical sell signal could pressure the Index.
** Expect the MPC to hold the policy rate at 0.5% at the Aug 5 meeting.
Investment Strategy: Selective Buy
– Energy (PTT, PTTEP, TOP, PTTGC, IRPC, SPRC, IVL) – oil price remains above US$40/bbl. – Stocks with positive 2Q20 growth prospects: TOP, PTTGC, SPRC, SCC, BGRIM, CKP, CPF, TU, ASIAN, TASCO, STA, STGT, AP, PRM, PTL, AJ, CBG, TQM, JMT, CHAYO, TQM, PTG, BCH
DJIA and oil prices rise amid promising developments in $1tn US aid package: DJIA gained 164 points to close at 26,828 while WTI oil price rose by $0.69 to $41.7/bbl after Congress and White House resumed talks on the $1tn pandemic rescue deal. Oil prices were driven by speculation US oil inventory would drop for the second week by 3-4m barrels (report tonight).
Auto – Ministry of Industry mulling 1 mil discount coupons to encourage car owners to upgrade to a new car: Authorities hope this would help the auto industry to recover and reduce air pollution. This would be positive for the Auto sector (SAT, AH, STANLY) and finance companies that provide HP loans (TCAP, TISCO, KKP).
Expect BOT to hold policy rate at 0.5%, neutral for banks but positive for finance companies: Although current economic conditions favor further easing, KSS expect the BOT to maintain policy rate because (i) it would be prudent to keep some policy space in case the economy contracts more than expected, (ii) an excessively low rate could encourage careless search for yields, and (iii) MPC members might want to wait for a clearer policy direction from the new Governor Mr. Sethaput Suthiwart-Narueput. Keeping policy rate unchanged will ease pressure on banks and the low interest cost will be positive for finance companies.