Asia Wealth Securities (AWS) released an analysis for the trading session on August 27, 2020, indicating the essential events in the stock market as follows:
Investment Overview Today – AWS expects the SET Index today (28 Aug) to move in a sideway-up manner, with a positive response from a Fed chair’s talk that positively affected the market as well as regional stock markets and the U.S. stock market last night (27 Aug). AWS keeps the same view, starting to see that the valuation of the SET Index has begun to laggard compared to the regional stock markets which are a good time to gradually accumulate stocks. AWS continues to focus on individual positive, defensive stocks and high dividend yield stocks based on our Investment Theme.
Fed chairman adjusted monetary policy, kept interest low, stimulated the economy and labor market – AWS has a positive view on investment. A speech by the Fed chair demonstrated his vision of monetary policy and the U.S. Federal Reserve’s economic outlook at the annual meeting in Jackson Hole entitled “Navigating the Decade Ahead: Implications for Monetary Policy”. The focus is that the Fed announced a monetary policy adjustment. It will change the approach for setting constant inflation targets to be the average inflation. This made it possible to adjust more to support the labor market and the U.S. economy. This gives the Fed a lower chance of raising interest rates. Although the unemployment rate is reduced, the inflation rate has not yet increased. AWS expects the Fed’s monetary policy meeting on 15-16 Sep, the Fed will maintain its policy rate at 0% -0.25% as before, but the inflation frame is likely to rise from currently 2%. In the past, the inflation rate in the U.S. was often below the target set by the Fed which AWS believes is a modest positive factor for the investment sentiment.
The U.S. reports second round of the forecasting of GDP in 2Q20 which will contract 31.7%, the biggest contraction in 70 years -the U.S. Department of Commerce The second estimate of GDP for 2Q20 (2nd 2Q20F) contracted 31.7%, a contraction at a higher rate compared to a 5% contraction of 1Q20. However, the 2nd of expectation was better than the first time which expected that would contract 32.9% and better than analysts expected a 34.7% due to the effect from lockdown measure which caused the economy to shut down to control the spread of the COVID-19 virus. While the U.S. economic contraction continued for two consecutive quarters, reflecting the overall picture of the U.S. economy that went into recession. While the U.S. National Real Estate Brokerage Association (NAR) said that the pending home sales index rose 5.9%MoM in July and was higher than analysts had forecast at level 3%.
The crude oil prices began to decline after the hurricane’s impact was limited – The crude oil prices began to decline after many companies prepared to resume oil drilling rigs in the deepwater of the Gulf of Mexico as the effects of Hurricane Laura became limited. Meanwhile, the supply dropped in the short term from the hurricane’s impact which offset from the high petroleum reserves. Currently, the U.S. Federal Reserve’s Office of Safety and Environmental Enforcement (BSEE) reported the impact of Hurricane Laura on approximately 84.3% of offshore crude oil production (unchanged). While the natural gas production cut is 60.1%, down from the original report (27 Aug) of 60.9%, with oil production in the Gulf of Mexico accounting for 17% of the U.S. production and natural gas production accounts for 5% of the U.S. production.
Today’s key economic statistics report – the U.S. will report the Purchasing Managers Index in Chicago in August (Chicago PMI), the Consumer Sentiment in Michigan in August (market expected at 72.8) and Consumer Expectations in Michigan in August.
Technical View – Today, AWS expects the SET Index to move between 1,316 – 1,337 points. (Support at 1,322 1,316 and 1,311 points and resistance at 1,331 1,337 and 1,342 points). The recommended stocks are GPSC, CPN, CK, MEGA and CKP.
1) Benefit from a successful vaccine development in the near future (Short term trading 1 month) – AOT, AAV, BA, ERW, M, CENTEL and MINT
2) Benefit according to the season (Short term trading 1-2 months) – BGRIM, CKP and GPSC
3) Benefit from the stimulus package (Short term trading 1-3 months) – CPALL, CRC, HMPRO, BJC, OSP, CBG, MTC, CK, BEM, SEAFCO, PYLON, TASCO, COM7 and WHA
4) Dividend Play (Middle term investing 6-12 months) – KKP, TISCO, QH, LH, ORI, NOBLE, DIF, INTUCH, HANA, EASTW, TTW, EGCO and RATCH
5) Long-term cumulative shares (DCA) (Investing more than 1 year) – ADVANC, AOT, BDMS, BEM, CPALL, DIF and PTT