After their recent steep fall, Thai shares gained 2.5 per cent yesterday on speculative buying and foreign investors piling up stocks to cover their short position.

The SET composite index began the day with a rise. It peaked at 639.47 before weakening mildly to close at 637.63. Turnover was Bt21.58 million.

Bangkok Bank jumped 5.76 per cent to Bt101, Siam Commercial Bank surged 4.76 per cent to Bt55, Land and Houses chalked up a 6.42-per-cent rise to Bt5.80, SVI was up almost 4 per cent to Bt10.60 and Hana Microelectronics rose 3 per cent to Bt25.75.

The stock market has slumped 12.72 per cent since the Bank of Thailand imposed harsh measures to counter baht speculation. The New Year's Eve bomb blasts in Bangkok and the draft Foreign Business Act approved by the Cabinet on Tuesday have also contributed to the fall.

KGI Securities (Thailand)'s vice president for economic and strategy research, Adisak Kammool, said yesterday's sharp gain was attributable to a technical rebound and some foreign investors buying to cover their short positions to lock in profit.

"The euphoria will last for only one or two days, because uncertainty and anxiety about a possible bombing on Children's Day this Saturday will restrict the gain. The resistance level is at 640 to 645 points," he said.

Adisak said the stock market would move in a range of 560 to 660 points during the first quarter. The estimate has been revised downward from an earlier projection of 660 to 760 points.

The broker recommended that investors wait and see on bank and energy stocks.

KGI Securities separately recommended that investors snap up electronic stocks, given the fact that they are in an upward cycle that is expected to extend from 2006 to 2009.

Export-oriented firms have a more positive psychological effect than firms dependent on the local market because of political tension and threats from possible bomb blasts, the broker said.

Moreover, firms in this sector are not affected by the draft Foreign Business Act because they have received Board of Investment privileges allowing foreigners to hold the full 100-per-cent interest.

"Foreign investors bought Thai shares today. There is rumour that JP Morgan bought stocks to cover its short position," Sicco Securities head of research Kongkiat Decho was quoted by Reuters as saying.

Yesterday's buying spree by foreign investors could be seen from the significant increase in prices of many big market-cap stocks, he said.

Despite the sharp increase in Thai shares, lingering uncertainties from politics and the government's measures still cast a dark cloud over the bourse, he added.

Another analyst said investors had realised that the amended Foreign Business Act would not cause much damage to local companies, and their alleviated concerns improved the situation.

Investors shrugged off falls in most regional stock markets yesterday. The KLCI of Malaysia ended down 0.7 per cent, Taiwan shares continued to slide with a 1-per-cent fall, the Nikkei dropped 0.6 per cent, and Philippine shares shed 0.4 per cent.

Oranan Paweewun

The Nation