• What happened?

In our last report dated November 21, 2019 entitled “Weak earnings outlook, brace for impact”, we said here could be further downgrades to 2019F earnings (by up to 2% of full-year forecasts) and market PE valuation, that would drag down the index to 1560, its 3-year average PER multiple. Yesterday, the SET Index fell and closed at 1569.5, close to our suggested support level. We will revisit our recommendation in this report.

• Action/ Recommendation

The SET tumbled yesterday, bucking trends in other Asian markets. We believe this is partly because the market is no longer attractive after large EPS downgrades for 2019F (-19% ytd) and 2020F (-17% ytd). There was selling pressure in big caps in Energy (-1.2%/ PTT), Commerce (-1.8%/ CPALL), ICT (-2.0%/ ADVANC), and Food (-2.7%/ CPF).

The current SET valuation suggests support level at 1550, given that the SET had bounced between -1.0SD to -1.7SD in every major correction in the past 10 years since the 2008 Global Financial Crisis. This implies the SET would be more attractive at 1550-1490, and we recommend to accumulate then.

Before the full-year results season in early 2020, some investors accumulate dividend stocks before the dividend payment date. We have short-listed stocks that meet this criterion – high final dividend payment, positive or mild-negative revision to 2019F and 2020F earnings (avoid stock that are expected to register earnings contraction). We  recommend TASCO, TCAP and TISCO.