Upside seen limited despite bullish overseas cues

• US stocks advanced in light volumes on Wed after the Federal Reserve lowered its projected interest rate path this year, citing the risks of slower-than-expected global growth and tepid business investments despite favorable growth in the US economy.

• In our view, the boost from bullish overseas sentiment may be limited as the Fed’s rate hike delay has already been priced into the market. In addition, the valuation of the Thai stock market is also no longer compelling. Even though the correction from above 1400 points over the past few sessions has pushed the SET Index’s FY16 foward P/E lower from the upper bound of its normal trading range at 15x to the current level of around 14.8x, the level still remains high. Moreover, heavy foreign selloff of Thai shares continued for a second straight day while institutional investors also stayed on the selling side. The trading range for the SET index is expected to be between 1365-1395 pointst today.

• Short-term strategy:

The ‘sell the rallies and buy the dips’ strategy remains appropriate. We advise investors to sell into strength around 1400+/- points and buy back on weakness at 1365+/- points. Equity exposure should be capped at 80% of the portfolio with the following key investing themes in play today:

(1) Tourism recovery play: Add more positions in AOT to the portfolio on dips
at Bt394 on view of continued strong recovery in tourism.
(2) 4Q earnings play:Hold onto short sell positions in TTA.
(3) Selective play: Hold onto ADVANC and take long positions in PTTEP as a
play on rising oil prices. On Wed, WTI crude oil prices rallied by as much as
5.8% after major oil producers said oil production freeze talks would go
ahead without Iran.

Source: poems.in.th / settrade.com