MACRO WIZARD - Heading towards a trade pact
(02/12/2019 - 08:50)

We opine market tone this week is likely to lean bias toward positive side. As deadline for the next tranche of the US tariff imposed on Chinese goods is approaching on 15 Dec, we should soon see conclusion from phase-one agreement between the US and China and such catalyst should continue to support the market with global play theme. We believe SET index is likely to trade in the range of 1,585-1,620 and our weekly top-picks include IRPC, IVL, KCE, MINT and SPRC.

 

Global play continues as hope on trade pact extends

Our weekly portfolio registered a gain of 4.1% last week while SET index edged lower by 7 points or notched a small decline of 0.4% as market turned pessimism on Sino-US trade talk after Trump signed bills to support protesters in Hong Kong. The legislations fueled fear to the market that it could complicate negotiation to settle down ongoing dispute between two economic hegemons and prolong global trade uncertainty. Adding salt to the wound, political tension in Thailand escalated as the House of Representatives was thrown into turmoil last week after junta defeated in parliament vote for 230-234 to prevent formation of a panel to study Section 44 and conflict within coalition parties raised concern over government stability. PETRO, ELEC, HEALTH and BANK are those leading outperformers last week. PETRO and ELEC gained traction from global play theme premised of hope on Sino-US trade deal while HEALTH is expected to benefit from a rise in spending budget for patients from social security and BANK was disentangled from concern on deteriorating NIM after policy rate should have bottomed.

 

Improving manufacturing data to reaffirm global bottoming out

There are gluts of economic data to release this week from manufacturing data to employment report. We start the week with Caixin manufacturing PMI on Monday morning which is expected to edge lower slightly from 51.7 to 51.5 after it managed to improve for four months in consecutive from low of 49.4 in June. Meanwhile, the US ISM manufacturing PMI sets to publish on Monday night, consensus sees the data should continue to recover in November with an estimation of 49.2 from 48.3 previously. Beyond that, we are going to have job report from the US on Friday including non-farm payrolls and unemployment rate. Market expects economy to add more 189k positions into the labor market in November versus 128k last month while unemployment rate should remain unchanged at 50-years low of 3.6%.

 

Russia on the first page

Apart from monthly economic data, President Trump is set to meet with the NATO in London during 3-4 Dec to discuss increasingly challenges that the world face from China and Russia. We believe NATO would avoid to raise the issue which potentially provoke conflict with the Russia especially after the UK research study warning of artillery shortage in the UK leaving NATO outgunned the opposition. In addition, OPEC and Russia are expected to meet this week on 5-6 Dec in Vienna. Market expects they would agree to extend oil production cut into 2H20 as Saudi Arabia may wish to see higher oil price to benefit the IPO of Saudi Aramco.