Bargain buying recommended

Stock analysts rushed to soothe market jitters yesterday as the bourse lost 3.04 per cent and the Stock Exchange of Thailand (SET) Index tumbled to 742.46 points.

They said investors wishing to hold shares for six months or longer could now pile up stocks because the SET Index had plummeted by 16 per cent since its 2008 peak of 884.19 points on May 21.

"Now is the time for investors to buy stocks if they want to invest for six to 12 months in the stock market. Politics is the short-term factor and the stock market can rebound sharply," Asia Plus Securities vice president Poranee Thongyen said at an urgently convened press briefing.

Yesterday's big tumble was attributed to the lingering selling spree by foreign investors, sparked by rising inflation and heightened by anxiety over mounting political tension as the People's Alliance for Democracy goes ahead with plans today to stage a rally in front of the Government House compound.

Foreign investors have dumped Thai shares with a net value of almost Bt40 billion so far this year.

"It is a normal phenomenon, that foreign investors will sell shares for fear of inflation," Poranee said. "Political uncertainty also dampens the Thai stock market."

She gave the September 19 coup in 2006 as an example.

On that occasion, the SET Index bottomed out when the bourse's price to equity (P/E) ratio was at nine or 10 times.

"I don't believe the political situation will be worse than that at the September 19 coup. The SET Index will be 700 points if the P/E ratio reaches 10 times," she said.

Energy stocks, including PTT, PTT Exploration and Production, Banpu and Thai Oil, still remain attractive, Poranee said.

Tisco Securities managing director Paiboon Nalinthrangkurn said the biggest corrections, each year over the past five years, had been about 16 to 18 per cent, and this implied that the stock market had now almost reached the bottom.

"Downside risk is limited. If we consider valuation, it is time for those who want to hold stocks for at least three months.

"The foreign investors' selling spree is also almost over," Paiboon told the press briefing.

Paiboon said Thailand's inflation rate, which was a threat to the stock market, was lower than that in other countries, and investors were panicking over the political situation and the Kingdom's current-account deficit.

Siam City Securities assistant managing director Sukit Udomsirikul forecast that the inflation rate would peak in August at 10 per cent.

"Investors should start piling up shares now, as a spate of negative factors are already factored into share prices. Risks will be lower than returns in the next six to 12 months," he said.

One Asset Management managing director Somjin Sornpaisarn, who also attended the briefing, said investors should accumulate shares offering dividend yields of at least 4 per cent.

"Retail investors who invest though mutual funds should start to buy unit trusts of long-term equity funds and retirement mutual funds. Inflation will have an impact this year only," he said.

SET president Patareeya Benjapholchai said political uncertainty and investor worries over the impact of inflation on the economy had hurt the local bourse.

However, the market downside is limited as bargain-hunting is expected to emerge once stock valuations fall to attractive levels, she said.

Recent falls have been mainly due to investors cutting back on their investments in the wake of political tensions, although accelerating inflation and rising global oil prices have also been clouding market sentiment.

The SET Index has fallen by 13 per cent since anti-government protests began on May 25.

Separately, Kasikorn Securities assistant manager for research Kavee Chukitkasem adopted a pessimistic approach.

He advised investors not to rush in to snap up stocks because he believes a further SET slump lies ahead.

"There are a lot of risks. Inflationary pressure and the selling spree remain," he said, adding that the SET's resistance level is 730 to 720 points.

However, investors who plan to hold stocks for five years or longer should buy shares now because they have a chance to make attractive returns, Kavee said.