• SETI set for correction amid external pressure: Heavy sell-offs hit global equity markets last Fri amid nervousness over an impending Brexit vote that could see the UK leave the European Union and a sharp drop of up to 3% in WTI crude oil prices on fears of growing oversupply after a rise in US oil drilling rig count reported by Baker Hughes in its weekly survey.
• Recent rall purely driven by S/T sentiment while fundamentals largely unchanged: In our view, the recent market rally was purely driven by S/T sentiment while fundamentals remained largely unchanged after a speculation that a Jun Fed rate hike was now off the table and an oil price rebound led the SET index higher to test the 1450-point barrier but failed to break through early last week. As the previous factors that earlier led the market’s rally have now turned into a drag after sliding oil prices, Fed uncertainty and Brexit concerns, we think the market may be at risk of a sharp correction today.
• Correction in store: In our view, the Thai stock market is now no longer cheap as it is currently trading at 15.3x forward P/E. Given that the recent market rally was driven by foreign investors and proprietary traders, it seems to us that any panic selling triggered by the above uncertainties may put the market into correction but we however see any dips toward 14.3x forward P/E, equivalent to the SET index level of 1360 points, the level that normally triggers renewal of institutional buying as a good re-entry point. The trading range for the SET index is seen between 1400, 1412-1435 points today.
• S/T investment strategy: Any big dips should be used as buying opportunities and buying would also be on a selective basis.
(1) Tourism recovery play: Hold onto AOT shares.
(2) Selective play: Hold onto CHG and TK shares and short positions on THAI shares.
Source: poems.in.th / settrade.com
