Get into property funds: brokers

Stockbrokers recommend investors buy into property funds prior to the widely expected government an-nouncement that capital control measures will be scrapped.

The stock market is expected to react positively to the removal but negatively if the measures remain, experts said. The SET Index closed down 0.28 per cent at 804.15 yesterday with trading value of Bt16.03 billion.

Brokers said it was likely the authorities would remove the 30-per-cent withholding measure that was implemented on December 19, 2006. The Bank of Thailand and Finance Ministry are due to meet today to discuss whether the measure should be scrapped in order to regain foreign in-vestors' confidence, though they may introduce new measures to cope with the consequences of the removal.

DBS Securities (Thailand) said if capital controls were removed, existing property funds would benefit. The company recommended investing in Central Pattana, CPN Retail Growth Property Fund (CPNRF), Quality Houses, Quality Houses Property Fund, Ticon Property Fund and Samui Airport Property Fund.

The removal of capital controls will reduce foreign investors' concerns over the reserve requirement and foreign capital inflows are expected to return, DBS Securities said in its report.

Siam City Securities said Central Pattana, Major Cineplex Group and Land and Houses would benefit from the removal.

CPNRF is the largest property fund, with a net asset value of Bt11.1 billion as of February 8. It is expected to expand by up to Bt6 billion this year. The fund will raise more cash for Central Pattana, while the company will also get dividends and profits from its holding of around one-third in the fund.

Siam City Securities up-graded its recommendation for Central Pattana from "hold" to "buy".

Asia Plus Securities also recommended "buy" for Central Pattana with fair value at Bt34.32 this year due to the expected economic recovery from the new government's economic-stimulus package. Consumer spending will be a key driver of Central Pattana's department store business.

However, Central Pattana's stock price fell yesterday by 3.77 per cent to Bt25.50.

Capital Nomura Securities believes there is a 60-per-cent chance that capital controls will be removed without any additional measures. This will be positive for the stock market, which will see more foreign capital inflows for equity investment.

Citibank anticipates a faster pace of baht appreciation if capital controls are lifted amid a weak US dollar setting. In addition, the offshore baht rate would be realigned with the onshore rate. The pace of baht appreciation without the curbs would contribute to a lower policy rate.

In addition, the removal of exchange restrictions would send a strong positive signal from the Samak Sundaravej administration that it wants to restore an investor-friendly regulatory environment.

Authorities would probably by inclined to provide fiscal assistance or subsidies to ease the plight of small and medium-sized exporters who would be vulnerable to sharp baht appreciation if the curbs were lifted.

Citibank also foresees the government might be inclined to hike portfolio taxes on offshore purchases of local fixed-income instruments.

Stock Exchange of Thailand president Patareeya Benjapholchai said the removal of capital controls would have a positive psychological impact on the stock market, while the fixed-income market and property funds would also benefit.

According to Standard and Poor's, world stock markets lost US$5.2 trillion (Bt171 trillion) in January due to the fallout from the US sub-prime crisis and fears of a global economic slowdown.

Emerging markets fell 12.44 per cent and developed markets lost 7.83 per cent to register one of the worst starts to a new year.

Equity markets in emerging countries also suffered heavy losses in January, apart from Morocco, which gained 10.17 per cent, and Jordan, which was up by 3.11 per cent. Turkey was the worst affected, with January losses reaching 22.70 per cent, followed by China on 21.40 per cent, Russia on 16.12 per cent and India at 16 per cent.

But only Argentina and Taiwan slipped into negative territory for the 12-month period.

The Nation