Asia Wealth Securities (AWS) released an analysis for the trading session on August 18, 2020, indicating the essential events in the stock market as follows:
Investment Overview Today – AWS expects that today (18 Aug) the SET Index is still volatile. AWS believes that the positive factors from the expectation of the Thai economy to recover in 2H20 and China’s economic stimulus measures will not have much positive impact on the SET Index and regional stock markets, but the risk of global trade and COVID-19 remains highly uncertain, causing risky assets to not be an attractive investment, considering the recovering gold price and U.S. government bond yields declining by the situation of COVID-19 that many countries began to resume lockdown measures, including U.S. trade measures towards Huawei company more serious.
The issue of global trade has become severe after the U.S. escalates trade barriers against “Huawei” – the U.S. Department of Commerce had announced to upgrade protection measures Huawei Technologies (Chinese telecommunications giant) to close channels from access to Huawei’s chips and technology. Including the addition of Huawei affiliates to the blacklist another 38 firms, making the total of Huawei affiliates that has been blacklisted a total of 152 firms since the U.S. started to make the blacklisted for Huawei in May 2019, and they have been blacklisted because the U.S. believes that Huawei relying on them to take advantage of U.S. technology, including the development of wireless communication networks.
China stimulates its economy through money markets which increasing the liquidity for a year – The Bank of China (PBOC) injected cash into the financial system through a market operation (Open Market Operations: OMO) through the Medium Term Loan Program (MLF) yesterday (17 August) for maintaining the liquidity in the market of CNY700bn (approximately USD100bn), the scheme has a one-year redemption period at an interest rate of 2.95%
NESDB reports Thai GDP in 2Q20 contracted 12.2%YoY – The National Economic and Social Development Council (NESDB) reports the overall picture of the Thai economy in 2Q20 shrinking 12.2%YoY, causing Thai GDP in the 1H20 to shrink 6.9%YoY. Also, NESDB estimates that 2Q20 will be the lowest in 2020 and expects to see the Thai economy recover in 2H20. The 2Q20 GDP report contracted less than expected and shrink less than the Tom Yam Kung crisis which contracted 12.5%. Overall, the Thai economy in 2Q20 was impacted by strict city shut down measures to curb the spread of COVID-19, temporarily halting its economic activities as well as the contraction of foreign demand, the tourism sector (Impact from international travel restrictions) and exports (Affected by weak demand of trading partners) affecting the economic activity in the country.
NESDB expected that the Thai economy in 2020 will shrink 7.5% – NESDB expects that the Thai economy in 2020 will shrink 7.5% -7.8% (previously expected to shrink 5%-6%), with pressure from the COVID – 19 which affect to the number of tourists decreases As a result of the measures to close the airspace and the trade conflict between the U.S. and China, with NESDB estimates that the global economy will shrink around 4.5%.
The important economic data which will report today- the U.S. reported the number of building permits in July (expected to increase 1.295 million units), the number of new homes under construction in July (expected to increase by 1.230 million units)
The interesting issues in this week – Following the U.S. Monetary Policy Committee (FOMC) meeting on 18-19 Aug with the key issue lies in determining the interest rate direction, and the Fed’s monetary policy outlook. While for the middle of the week (19 Aug), following the Capacity Cut Compliance Agreement (JMMC) meeting of OPEC+ (AWS has a negative view. Which believe that it is not the time for members to pass a resolution to increase the proportion of production cuts) and at the end of the week, following the Manufacturing and Service Purchasing Managers (PMIs) of the U.S. and Eurozone.
Technical View – Today, AWS expects the SET Index to move between 1,307 – 1,329 points. (Support at 1,314 1,307 and 1,299 points and resistance at 1,322 1,329 and 1,338 points). The recommended stocks are MAJOR, TRUE, WHA, CENTEL and PTTGC.
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