Capital, earnings to the fore

Sukit Udomsirikul, assistant

managing director of Siam City Securities

The stock outlook for this week will be driven by two main factors, namely foreign capital inflows and expectations of first-quarter corporate earnings.

Overall, the investment climate this week is expected to recover significantly from last week, as it is expected to be the starting point of a global market recovery for this year.

The following are supporting factors:

First, foreign capital is likely to return to Asia as the US stock market calms down. The VIX index, which reflects future volatility of the US stock market, fell to its lowest level of the year last week.

Second, short-term speculative capital used in yen carry trades will return to its role in the stock market after the recent depreciation of the yen.

Third, the outlook for the US financial crisis is apparently improving as bond prices have recovered, while credit-default swaps fell.

Domestic factors this week include banks' earnings for the first quarter, as the market consensus is that earnings will be a supportive factor for the banking sector for the short term.

For non-bank earnings, recommendations for picking up stocks will be selective for good performing ones, including PTT Exploration and Production, PTT Chemical, Thai Vegetable Oil, Tata Steel (Thailand), Amata Corp and Thai Oil.

Thus, this week investors should go overweight in big cap stocks including PTTEP, PTTCH, Advanced Info Service, TOP, Thoresen Thai Agencies and Banpu.

Kim Eng Securities (Thailand)

The company expects near-term selling to spur a short-lived correction after the market on Thursday closed a hair below the year-to-date high on the back of strong trading volume and net foreign buying.

Funds inflows are likely to drive Thai stocks past the YTD high to 850-855 soon.

Institutional investors (foreigners net-bought Bt2.8 billion) returning to the market, earnings results holding up US equities and a positive earnings outlook for Thai companies are likely to fuel trading of blue chips and support stronger trading on the SET.

PTT, TOP, PTTEP and PTT Aromatic and Refining are likely to continue attracting investors on their undemanding valuations.

Investors are recommended to "play" high-beta coal and freight shares, including Banpu, Unique Mining Services and Thoresen Thai Agencies. In addition, big banks including Bank of Ayudhya, Kasikornbank and Bangkok Bank should continue to advance.

Also recommended are big brokers including Phatra, Asia Plus and Bualuang.

Therdsak Thaveeteeratham, senior vice president of Asia

Plus Securities

Over the past month, the SET index has surged around 5 per cent, pushing the price-to-earning ratio to near 12 times. Such a ratio, as well as the stable baht outlook, however, discourage foreign capital inflows.

The key factors to weigh on the stock market this week are banks' earnings and the direction of oil prices and refining margins, which will affect energy stocks.

The eight banks under our coverage are expected to post Bt18.88 billion of net profit for the first quarter and Bt29.26 billion of operating profit. However, banking stock prices have over the past month reflected the first-quarter earning results, as the banking index has surged 12 per cent over the period. Thus, the company has warned of profit taking.

Energy stocks, which have been supported by the recent rise in oil prices and refining margins, have recovered from the fourth quarter last year.

Thus, this week, energy stocks are expected to drive the market until next week. We recommend Banpu, Thai Oil and PTT, with expected upside gains of 28 per cent, 23 per cent and 24 per cent respectively. However, we warn of short-term volatility of oil prices and refining margins.

Asia Plus anticipates the SET index this week to hover around 830-860. Investors shouldn't be too concerned about current political issues, particularly the political party dissolution case, as it will take quite a long time before the end result will emerge.

Too much worry will make investors lose buying opportunities.