Brokers recommend defensive stocks

Brokers recommend investors start picking up commodity and basic consumption stocks that are not affected by politics during this bearish period, as Thai stocks plunged below the psychological level of 800 at one point yesterday.

The SET Index, however, closed the day 0.11 per cent higher at 809.82.

Brokers recommend investors select defensive stocks that are not affected by political tensions or inflationary pressure.

Thanachart Securities said in its report that it recommended "buy" for Advanced Info Service, Banpu, BEC World, Bangkok Dusit Medical Services, PTT, PTT Exploration and Production and Kasikornbank. These stocks, it said, mostly had stable cash flows and paid high dividends.

Thanachart Securities has downgraded its forecast for growth in gross domestic product for 2008 and 2009 from 5.2 per cent to 4.7 per cent, and 5.6 per cent to 4.8 per cent, respectively.

Pongrat Ratanatavanananda, vice president at the research department at Bualuang Securities, recommended stocks that are free from political and inflationary impacts, including CP All, Bumrungrad Hospital, Bangkok Dusit Medical Services and Thai Vegetable Oil. She estimates support and resistance of the SET Index at 800 and 808, respectively.

She added that the SET Index had fallen below 800 yesterday due mainly to foreign net selling, rising inflationary pressure and internal political problems.

Finansa Securities echoed her view, expecting to see continual net selling by foreign investors, particularly in banking and energy stocks. This also encouraged local investors to sell stock as well.

However, notably, the trading volume has fallen significantly, indicating that foreign selling momentum is about to end. Foreign investors may return to Thai stocks and lift the SET Index back to 835 again, said Finansa.

Finansa pointed out that the last three stock plunges had been because of negative factors, including the sub-prime crisis, with falls of 11 to 15 per cent each time.

The company said foreign investors over the past three falls had sold until the SET decreased by 9 per cent, before buying back Thai stocks. However, over the past eight days, foreigners have sold until the SET fell by 12 per cent, representing net selling of Bt22 billion which is considered "oversold", Finansa said.

Patareeya Benjapholchai, president of the SET, said yesterday that politics was still a key factor affecting investment sentiment and creating concern for foreign investors.

However, despite foreigners' net selling, local investors have seen the

chance to shop around for cheap stocks. "The SET Index has fallen due to politics several times, but every time, when political tensions end, foreign investors come back. This time will be the same," she said.

Meanwhile, the SET yesterday signed a memorandum of understanding with Siam Paragon department store to hold the SET in the City fair 2008, the fifth annual stock fair, during November 20-23 at Siam Paragon.

The SET expects the high spending power of shoppers at the department store to encourage more new investors to join the equity market.

The SET and financial services firm CLSA will also on September 17-19 hold Thailand Focus, an event to clarify information overall for foreign investors.