Asia Wealth Securities (AWS) released an analysis for the trading session on August 6, 2020, indicating the essential events in the stock market as follows:
Investment Overview Today – AWS expects the SET Index to resume moving in a sideway to sideway up in a narrow frame. Yesterday afternoon (5 August), the SET Index recovered after the MPC maintained the policy interest rate as expected and did not send a negative signal to the overall economy, including additional interest rate cuts for the rest of the year, coupled with concerns over excess supply in the crude oil market, resulting in the buying power of banking and energy stocks. In the short-term, AWS believes the investment sentiment will turn to be positive towards the end of the week on the expectation of the U.S. stimulus package after more than a week delay, including strong economic statistics.
For short-term investment strategies, recommend speculative investment in energy and banking sectors, AWS chooses PTT, PTTEP, PTTGC, TOP, BCP, SPRC, BBL, and KKP, while in the medium to long term strategy, AWS continues to focus on domestic play and defensive stocks such as HMPRO, BJC, CBG, TTW, EASTW, BCPG, CKP, GPSC, DIF, INTUCH and EGCO, as well as stocks that are expected to have strong 2Q20 earnings results, including ASIAN, CPF, TU, OSP, TASCO, STA, STGT, COM7 and PTG.
The MPC maintains policy interest rates as expected – The MPC has resolved to maintain its interest rate policy at 0.50% as expected. AWS sees the MCC view that there is a tendency to gradually recover from easing measures to control the COVID-19 outbreaks of domestic and the gradual recovery of economic activities around the world. But still need to be wary of the potential for an outbreak of the second wave. The MPC is expected to take at least 2 years for overall economic activity to return to normal levels before the outbreak. But the recovery varies greatly between economic sectors.
The international economic statistics remain strong – (1) the U.S. Department of Commerce reported that the U.S. trade deficit in June was USD50.7bn, drop of 7.5% due to the exports increased 9.4% to USD1583bn which was the biggest increase since March 2015, while imports of goods increased 4.7% to USD2089bn. (2)The U.S. Final Services Purchasing Managers Index (PMI) increased to 50.0 in July from 47.9 in June, the PMI index at 50 in July, reflecting that the U.S. service sector starts to have the stable after 5 consecutive months contraction and (3) The U.S. Institute for Supply Management (ISM) survey revealed that the U.S. service sector index rose in July to 58.1 (the highest level since March 2019). Up from 57.1 in June and better than analysts expected
Follow up on positive factors from the U.S. in the late week – the interest issue which are (1) the new round of stimulus in the U.S. which expected to be concluded at the end of this week and (2) The report of non-agricultural employment statistics of the U.S. which is scheduled to be disclosed on Friday (7 Aug) which one of the economic variables that the Fed is prioritizing, analysts forecast in estimated that employment in the U.S. will increase 1.36 million in July and the unemployment rate is expected to drop to 10.7%. However, the U.S. private sector employment in July rose 167,000 positions which lower than analysts had previously expected to add 1 million positions and down from June’s which increased 4.314 million positions.
Technical View – Today, AWS expects the SET Index to move between 1,329 – 1,358 points. (Support at 1,335 1,329 and 1,320 points and resistance at 1,343 1,350 and 1,358 points). The recommended stocks are IRPC, HMPRO, PTTEP, DOHOME and BGRIM
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