Tension likely to depress the SET further

Stockbrokers are likely to downgrade their forecast for the SET Index this year from the previous 958 points to lower than 900, due mainly to rising political tensions.

Securities Analysts Association secretary-general Sombat Narawutthichai said late on Tuesday that the association was conducting a new survey on stock analysts' views on the outlook for the bourse, due to several changing factors.

"Now we've sent questionnaires to analysts," he said. "Most of them are likely to lower their forecast for the SET Index due to several factors, including political tensions about which no one can anticipate the outcome. Personally, I believe the SET will fall lower than 800 in the short term. If the political tensions are prolonged, the average SET Index target might be lower than 900."

The SET closed yesterday at 808.92, up 0.26 per cent from Tuesday.

According to the association's previous survey, analysts believed the SET Index would likely end the year at 958.

However, if there is no political violence, the index might rise to 900, Sombat said.

Sombat believes the earnings growth of listed firms is expected to average 20 per cent, as anticipated earlier. But if the negative factors linger, there would be a revision again in the third quarter of the year.

Asia Plus Securities CEO Kongkiat Opaswongkarn said three negative factors had affected stocks: sluggish global economic growth due to rising inflation and higher interest rates, the government's intervention in the oil refinery margin, and the political situation.

"The political factor affects investment and the business sector both directly and indirectly. Over the past three months, we conducted a roadshow to maintain that the country was back to democracy. But it was a waste," Kongkiat said.

Meanwhile, Credit Suisse Group said investors should favour shares in Thailand, Hong Kong, South Korea and Indonesia because they are the cheapest in Asia.

China and India are the "most overvalued", analysts including Sakthi Siva wrote in a report. "While the consensus favours domestic defensives, we favour the four cheapest markets."

Siva, who is based in Singapore, was voted Asia's No-2 equity strategist in Asiamoney's 2007 broker poll. She advises investors to buy shares of companies that rely on exports - even amid concerns the US economy is slowing - because shares of Asian companies that rely on local demand are trading at "large premiums" to the region.