Stock up on service, telecom sectors

Several brokerage houses recommend investors buy hospital, hotel, commerce and telecommunication stocks, saying they should be better shielded from rising inflation.

Kavee Chukitkasem, executive vice president of Kasikorn Securities, yesterday said investors should accumulate stocks in the service sector because such firms' costs should not be affected by the higher prices of goods.

He also favoured hospital, hotel, commerce and telecommunication stocks, saying they should still provide good returns even in a period of soaring inflation.

Chutima Woramontri of Thanachart Securities said investors could pay more attention to asset-related sectors such as hotels because room rates have increased as a result of inflation while investment costs were already fixed.

Kavee said investors should avoid petrochemical and refinery sectors as well as banking and property sectors, contrary to a position several foreign funds are taking.

"When oil prices rise, we should avoid the banking and property sectors because they could be affected by rising interest rates. But I think interest rates would not be raised or lowered too much. This would ease some pressure on these sectors," he said.

However, Arparporn Sawaengpak of DBS Vickers Securities (Thailand) recommended investors buy banking stocks because they should pick up as the economy resumes its recovery.

She said the housing sector should also benefit from the government stimulus package designed to boost real-estate transactions.

Kavee said inflation could surge further and peak in the third quarter.

He said growth could ease in the second half of the year if prices for commodities and oil adversely affect the market.

He is also concerned about political uncertainty clouding the market.

Meanwhile, Bank of Thailand Governor Tarisa Watanagase said the bank did not need to raise its policy rate if core inflation remained below its 3.5-per-cent target.

Core inflation excludes the price of fuel and food.

She said headline inflation, which factors in food and fuel prices, as well as changes in the price of goods and services, had accelerated. But the levels may not be passed on to core inflation in a way that exceeds its current level, which is below 3.5-per-cent.

Weak consumption may not worsen core inflation, she added.

However, she said the central bank would move on its policy rate if headline inflation raised the cost of production and when core inflation levels drew concern.

"There is a time lag before headline inflation affects core inflation. We do not need to do anything if production costs do not climb. But if there is concern about rising costs, we will consider using monetary tools," she said.

 The central bank insists it is monitoring both core and headline inflation. The bank recently revised up its inflation forecast for the year after oil and food prices skyrocketed.