• 
• 

Published on October 30, 2007

 The Thai stock market rallied 2.29 per cent yesterday to a fresh 11-year high, driven by a continuing flow of funds, particularly into blue-chip energy stocks, on expectations of a rate cut by the US Federal Reserve at its meeting tomorrow.

The looming December 23 general election is also giving a big boost to the Thai stock market.

The US dollar also fell in Asia yesterday to a record low against the euro of $1.4426.

Stock markets across Asia were euphoric, led by India with a 3.89-per-cent gain, Hong Kong with a 3.89-per-cent surge and China with a 2.83-per-cent rise.

The Thai stock market was the fourth-biggest gainer in the region. The Stock Exchange of Thailand (SET) Index closed at 915.03 points, marginally below the day's high of 916.06, with a moderate turnover of Bt24.4 billion.

SET president Patareeya Benjapholchai said her agency had tightened its monitoring of stock trading following concern from many quarters that politicians might take the opportunity to use returns from the stock market to finance their general election campaigns.

"We've tightened the monitoring process, but so far we've found no irregularities. The sharp rally can be ascribed to capital flow into Asian stock markets. Energy stocks led the rally, as investors expect earnings in this sector in the third and the fourth quarters to outperform, following sharp increases in fuel prices. The energy sector has the highest weight in the Thai stock market, and that's why the SET Index has surged," she said.

Referring to the listing plans of Esso (Thailand) and Star Petroleum Refining, Patareeya said she had asked both companies to file their applications by the end of the year, in order to take advantage of corporate income tax incentives that expire then.

"It's possible that both firms may not be able to list on the stock market this year, but we'd like them to apply, because they can gain the tax benefits. Then it may be convenient for them to list on the SET in the future," she said.

Under the tax-incentive scheme, companies listing on the stock exchange, or at least filing applications to list, will be subject to only 25-per-cent corporate income tax, compared with the regular rate of 30 per cent.

Markus Rosgen, Citigroup's chief Asia strategist, believes Asian markets will peak later this year or early next, driven by strong excess liquidity and year-end allocations. But he said historically, excessive liquidity growth rates peak at about 12 per cent and that liquidity had a high tendency to roll over once this level is reached.

Over the November-January periods in the years between 1990 and 2006, Thailand and Indonesia saw the best returns in Asia outside of Japan. In terms of probability, Malaysia, Singapore and Thailand all saw positive returns 76 per cent of the time over this period.

Separately, Citigroup said Asian funds remained overweight Asean but underweight North Asia. The sector weights of Asian funds have risen most in materials and energy. In contrast, weightings in non-bank financial services and banks have dropped to all-time lows of 5.2 per cent and 11.3 per cent, respectively.

In a nutshell, Asian funds remain focused on domestics and are still most overweight on diversified financials and real estate.

A Merchant Partners Securities analyst said a buying spree in energy stocks had propelled the Thai stock market.

The record oil price triggered by Middle East tensions and fears of a supply shortage during the Northern Hemisphere's winter, coupled with the weakness of the dollar, ignited buying pressure in energy stocks, the analyst said. However, spiralling fuel prices may hurt listed companies' earnings in the future.

A Fareast Securities analyst warned investors who were planning to scoop up energy stocks that their prices are overbought. The analyst recommended investors pile up securities and commercial-bank stocks instead.

Siriporn Chanjindamanee

 The Nation