Daily Strategy for Investors on December 2, 2019
Daily Strategy for Investors on December 2, 2019.
Daily Strategy for Investors on December 2, 2019.
2 ธ.ค. 2562

KGI Securities (KGI) has made an analysis for the trading session on December 2, 2019, pointing out some of the must-know events in the equity market as follows:
 
KGI expects a modest recovery in the SET Index in December, driven by i) a good chance that Thai GDP and EPS revision would not get any worse, ii) KGI’s view that the US and China can strike a last-minute trade deal, and iii) global risk on mode that should continue as the manufacturing PMIs showed signs of traction.
Taking the positive view of a possible December rebound, KGI focuses its stock themes on cyclical plays, Thai tourism recovery and the sector that benefits from GDP revisions could reach the trough soon.
KGI’s December top picks are Esso (Thailand) (ESSO), Star Petroleum Refining (SPRC), The Erawan Group (ERW), Minor International (MINT), Kasikornbank (KBANK), Siam Commercial Bank (SCB) and Amata Corporation (AMATA).
 
November model portfolio down 0.9%, slightly underperforming the market
KGI’s November model portfolio dropped 0.9%, slightly under-performing the SET Index that edged down 0.2%. There were three names that outperformed the main index; Star Petroleum Refining (SPRC) rallied 10.1% on hopes of strong earnings recovery next year while Bangkok Chain Hospital BCH) gained 3.0% on decent 3Q19 earnings and Thai Oil (TOP) closed almost flat.
The other top picks disappointed KGI, with Amata Corporation (AMATA) tumbling more than 10% amid concerns on the timeline of Eastern Economic Corridor (EEC) investment inflows and some change in AMATA’s criteria to book the land sales.
During 11M19, KGI’s model portfolio posted a 13.3% return compared to the SET Index which moved up 2.6% over the same period.
 
December market view: Both GDP and EPS revisions could be nearly through, signaling a buying opportunity
Despite recent weakness in the SET, the local market has a good chance for a year-end tactical recovery due to the following reasons. First, KGI believes both GDP and EPS revisions are nearly through, given the current degree of pessimism on 2020 GDP and earnings forecast from the street. Second, for the economic benefits of both sides, the US and China are likely to strike a last-minute trade deal before the December 15 deadline; recently, Trump’s signing the Hong Kong Human Rights Act spurred market concerns, but KGI believes that the economic agenda is crucial for both Trump and Xi’s political strength in 2020. Third, global risk assets should continue to do well this month following an unexpected expansion in China’s manufacturing PMI for November.
That said, KGI sees downside risk to its current index target of 1,650 for end-2019 as the recent EPS cut was deeper than expected. Given KGI’s latest model calibration showing fair PE of 16.5x and mid-2020 consensus EPS of 98.0, it is possible the SET Index would end this year around 1,620.
 
December stock picks: Take a bet on cyclical recovery and bottom of GDP revision
Taking the view of a market recovery in December, KGI recommends investors to focus on the cyclical recovery, tourism momentum and the sector that may benefit from the view that Thai GDP revisions would soon reach the bottom. KGI’s preferred sectors in December are refinery like Esso (Thailand) (ESSO) and SPRC, tourism (hotel) like The Erawan Group (ERW) and Minor International (MINT) and banking like Kasikornbank (KBANK) and Siam Commercial Bank (SCB). Lastly, KGI recommends returning to a stock that was over-punished in November while its 2020 investment theme still looks solid; AMATA falls into this category, as the share price was hit in recent days given the company’s guidance to change its criteria to book the land sales.
 