Cautious range trading

• Yellen’s remarks: Federal Reserve Chair Janet Yellen said in a speech at the World Affairs Council of Philadelphia that further gradual increases in the federal funds rate were likely to be appropriate despite a disappointing May jobs report as wages contiued to rise, raising the prospect of a rebound in employment in the following months.
 

• Dovish tone: The market expected the Federal Reserve to wait for more economic data after Yellen said too much significance should not be attached to any single monthly jobs report following ugly May job numbers and a rebound in job growth was likely in the following months. Even though she said interest rate rises were coming, she did not mention a Jun or Jul rate hike was in play as previously signaled, reducing the odds of an interest rate hike in Jul to 22% after Yellen’s remarks from 50% last week.
 

• Market reaction likely positive: In our view, the US FOMC’s policy meeting next week may now carry less weight as the market would look beyond this month into Jul’s meeting. The trading range for the SET index is seen between 1434-1450 points today. In the near term, investors should be more cautious in trading and any rallies should be taken as an opportunity to take profits.
 

• Trading strategy: In the near term, the ’sell the upsticks and buy the dips’ approach on a selective basis looks appropriate. For long-term investment, any big market dips should be taken as buying opportunities.
(1) Tourism recovery play: Hold onto AOT shares.
(2) Selective play: Hold onto CHG and TK shares and short sell THAI shares after share prices have run far ahead of fundamentals and our FY16 target price of Bt12.90/share and the earnings outlook remains uncertain in 2QFY16 amid the downward revenue trend though the national flag carrier turned in a profit in
1QFY16.

Source: poems.in.th / settrade.com