Trading with caution

• Fed leaves rates on hold as expected: Despite improvement in overall economic data, slower US hiring and fresh worries about Brexit amid unpredictable impacts on financial and capital markets led the Fed to keep interest rates unchanged on Wed and signal that it remained stuck with its 2016 rate path to raise rates once this year. In our view, a rate increase could come at the earliest in Jul if Britain votes to stay in the EU.
 

• Thai stocks remain dominated by speculative trading: In our opinion, much of the Fed’s decision to leave rates unchanged appears to have already been discounted into the market following Fed Chair Janet Yellen’s remarks last week but Brexit risk, which may shake global currency and equity markets, still lies ahead, a factor that could possibly trigger risk-aversion sell-off ahead of the Brexit vote.
 

• Institutional selling spree continues after possible Brexit: Combined net institutional selling of Thai shares topped Bt6.7bn over the last 4 trading days and foreign fund flows also slowed down during the same period. Both institutional and foreign investors also increased their short positions in futures. It seems to us that the market has largely been dominated by a money game of short-term speculative trading for the meantime. Even though there may be room for further upside from Fed’s rate decision in the near term, the overall downside risk from Brexit is still lurking around the corner. In this sense, investors should watch out for a possible bout of risk aversion selling. The trading range for the SET index is expected to be between 1420-1445 points today. Any rises towards resistance should be used as an opportunity to take profits.
 

• Short-term investment strategy:Any rallies are seen as an opportunity to take profits and any correction should be used as a buying opportunity.
(1) Tourism recovery play: Hold onto AOT shares.
(2) Selective play: Hold ontoTK shares and shortpositions on THAI shares.

Source: poems.in.th / settrade.com