"We believe there is a group of listed Thai companies which, regardless of current political tensions, are likely to report strong earnings this year. The characteristics of this group are sound management, operating in a growing industry, having a strong market position (typically the industry leader), ongoing investment plans, and prudence in allocating capital," the paper noted.

Phatra Securities said that companies with independent growth engines are likely to perform well, regardless of politics.

Electricity Generating Plc (Egcomp) and Airports of Thailand Plc (AOT) are in the group, the broker said. Stocks with special situations are those undergoing mergers, acquisitions and asset value increases.

In the financial services sector, the broker forecasts an increasing probability of merger and acquisition activity, especially involving small banks. The merger and acquisition trend will continue in the telecom and entertainment sectors.

"Regarding asset 'reflation' [sic], over the past 12 months we have witnessed a continuing improvement in the fundamental outlook for prime-location property. Both grade 'A' condominiums and office property saw declining vacancy rates and rising prices," the paper stated.

Phatra Securities expects interest rates to peak this quarter and the fundamental outlook for both banks and property sectors remains attractive.

The broker said that bank outlook is based on credit growth and fee-based income.

"Even without government investment, we expect the rate of loan growth to accelerate. We are forecasting sector net loan growth to rise from 7 per cent in 2005 to 12 per cent each in 2006 and 2007. This is based upon stronger investment activity because of real growth in organic demand and new investment exceeding the internal financing capability for companies," the paper said.

The broker has been cautious on the property sector's outlook over the next one to two quarters because some potential homebuyers are likely to defer their purchase due to political uncertainty.

"In the long-term, however, our positive industry outlook remains intact. We expect reduced supply this year will lead to a more favourable demand-supply picture. This should boost the sales of large, professional developers and return to them some pricing power," Phatra Securities said.

Its top picks are Bangkok Bank, Siam Commercial Bank, and Krung Thai Bank, while it prefers Preuksa Real Estate Plc, Asian Property Plc and Land & Houses Plc.