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Published on January 9, 2008

Despite the continuing selling spree by foreign investors, two foreign financial institutions - Credit Suisse and HSBC - have overweight investments in the Thai stock market.

Foreign investors have sold Thai stocks with a cumulative net value of Bt12.9 billion so far this year. The Stock Exchange of Thailand (SET) Index ended a four-day tumble yesterday by rising 0.42 per cent to 811.63 points.

Credit Suisse said in a note that it remained overweight in the Thai stock market following a 16-per-cent upside gain from the SET Index target. However, the Swiss financial firm cut its SET Index target for this year from 1,132 points to 935, due to a sceptical view of Thailand's political situation following the December 23 general election.

Credit Suisse said the Thai stock market had an upside gain of 16 per cent despite the downward revision of its SET Index target, and that was why it still recommended "overweight".

A recovery of both domestic consumption and listed companies' earnings growth would help improve SET sentiment, it said, and recommended investors snap up domestic demand-oriented stocks, because the global economy was in a fragile state in the aftermath of the US sub-prime mortgage mess.

HSBC also remains overweighted on Thailand.

"After the election result, this has become a more difficult call," HSBC said in a note, "but, on balance, we see the emergence of a moderately stable government helping to restore economic confidence. With valuations cheap [the price-to-earnings ratio is 11.6], downside risk is limited.

"We are generally underweight in the most cyclical and high-beta markets. This includes Japan, where politics is paralysed, earnings and economic forecasts are being revised down, and domestic investors still show no inclination to buy."

Even though the two foreign financial firms have bullish views on the Thai stock market, SET chairman Pakorn Malakul Na Ayudhya yesterday said the SET Index was likely to dip below the psychological 800-point mark. The sell-off by foreign investors, triggered by mounting fears over a economic recession in the US, has yet to finish, he said.

Business Development Nextview (Thailand) vice president Thiti Tharasuk echoed Pakorn's view by saying the SET Index was likely to dive to 760 points in the next few months as oil prices threatened exports - the engine driving Thailand's economic growth.

"Foreign investors are now concerned about the spike in oil prices as well as the US sub-prime woes. Their views on Thai politics have improved following the election, but they will still watch for changes in policy by the next government," he said.

If the next government lacks stability, the SET Index may dip below 760 points, Thiti said, adding that the chance of seeing the SET Index up around the 1,000-point mark in the first half of the year was now slim, because the overall economy and the Thai stock market are not attractive.

Meanwhile, SET president Patareeya Benjapholchai said Thailand Post was the state enterprise with the greatest possibility of listing in the Thai stock market, because it did not use national assets for its operations.

Earlier, State Enterprise Policy Office director-general Areepong Bhoocha-oom said no state enterprises would be privatised in the next two years, because of the time-consuming process needed to avoid a repetition of the challenge to PTT's privatisation.

The Supreme Administrative Court recently ruled PTT should return its three natural-gas pipelines to the government on the grounds that they were state property.

Siriporn Chanjindamanee

 The Nation