• Falling oil prices heavily punish energy counters: The crude oil price continued its march lower, down by more than 3% on Mon. The latest WTI crude traded at around US$40/barrel in early trading on Tue. Given a more than month-long streak of declines in crude oil prices, bucking gains in shares of energy companies like PTT and PTTEP driven mainly by fund flow effect, we believe the market will likely look back at fundamentals again after a sharp market pullback on Mon.
• Fund flows slow for 2nd day running: A recent sizzling rally in the SET index was driven largely by strong fund inflows of more than Bt40bn, which now showed signs of abating. In our view, fund flows now bear close watching after net foreign buying of Thai equities slowed for a 2nd day in a row. It seems to us that foreign profit-taking will likely emerge after ECB and BOJ easing speculation runs out of steam.
• Focus shifts back to fundamentals: The current valuation of the SET index looks stretched at 16.4x forward P/E after a recent red-hot rally of more than 100 points within only one month plus, making it now more sensitive to surrounding factors and leaving it at risk of correction at any time. Under this circumstance, investors should exercise more caution in trading as more pullback could be on the cards for Thai stocks today led by a sell-off in energy names. The trading range for the SET index is seen at 1500-1520 points today.
• Investment strategy: Under current market conditions, selective play looks appropriate with a clear stop loss point set at 1490 points.
(1) Tourism recovery play: Hold onto AOT.
(2) Selective play: Hold onto CPF.
(3) Upside momentum play: Hold onto SCN.
Source: poems.in.th / settrade.com
