• Firmer oil a boost for risk appetite: WTI crude oil prices jumped to 2016 highs to settle above US$50/barrel. In our view, firmer oil prices would whet appetite for risk assets and lift sentiment in energy shares, providing a boost for equities in the near term.
• China’s trade data and Japan’s GDP numbers in focus: China is today due to release its trade figures, which are expected to remain in contractionary territory. Any misses on the downside of these import and export data points could add more negative pressure to the already expensive stock market. In Japan, GDP data, which is also on tap today is expected to show a modest growth of 1.9% y-y. If data comes in line with market expectations, it may take some pressure off the BOJ, which is scheduled to meet next week, for further stimulus action.
• Valuation no longer cheap, cautious trading seen as best strategy: Valuation-wise, Thai stocks are no longer cheap as the SET index is currently trading far above 15x forward P/E. To play current market conditions, cautious trading seems to be the best strategy with a clear stop loss put in place. The trading range for the SET index is seen at 1434-1450 points today. A breakdown below this trading range may set the market up for a sharp pullback. As a result, it is best to set a stop loss at 1430 points.
• Trading strategy: In the near term, the ’sell the rallies 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 positions on THAI shares.
Source: poems.in.th / settrade.com
