Good times for bargain hunters

The SET recovered strongly on Friday despite fears of a political turmoil. It seems to me that big investors unwound their short positions, as most investors gave up on the equity market.

Is there a fundamental change, which could cause the equity market to bottom-out, or is it just short-term rebound resulting from tactical trading? I bet on the latter reason.

Apart from domestic political instability, the WTI crude oil price will likely correct further in the coming weeks due to increase in production and the lifting of a fuel subsidy by the Chinese government.

However, higher fuel and food prices in the mid-term will cause inflation to shoot up further. On the macro view, market risk is increasing and creates a dark cloud over Thailand for the next three months. Therefore, keep a close watch on your investments.

Bualuang Securities' picks are Banpu, CP All, Bumrungrad Hospital (BH) and Thai Vegetable Oil.

tisco securities

The SET Index surged 26 points or 3.6 per cent last Friday after a protest by the People's Alliance for Democracy to Government House passed off peacefully despite some minor scuffles between police and demonstrators.

With political tensions easing, we believe the index could soon retest the 800 barrier.

Periodic political convulsions in Thailand have traditionally provided opportunities to pick up good fundamental stocks at cheap prices. In the past the market has always bounced back from panic selling induced by political crises - in May 1992, in the anti-Thaksin protests of January 2006 and the September 2006 coup. Note that since 2004, the SET Index has experienced five sharp corrections, with an average drop from peak to trough of 15.5 per cent.

However, any sustained recovery in share prices this time round is likely to take longer than previous rebounds due to the slowdown in global economic growth, the US housing crisis and the build-up in inflationary pressures caused by near-record crude-oil prices. The market's mood has also been dampened by very clear signals from the central bank governor that the Bank of Thailand will raise interest rates at its next policy meeting on July 16.

Vajiralux Sanglerdsillapachai, Executive Director,

Trinity Securities

On Friday, the SET rebounded strongly by 26.44 points to reach 768.90, a 3-per-cent correction on Thursday. Bank and energy stocks showed a robust rebound as fears of political violence ebbed and current valuations became attractive. Also, the May trade surplus of US$1.29 billion (Bt43.3 billion), which was much better than expected, helped bolster market sentiment. For this week, if there is no political chaos, we expect the SET index to continue rising to 780-790 points.

We expect energy stocks to continue performing well this week, even though there was a strong rebound on Friday. We pick Thai Oil, as we expect robust second-quarter earnings. Also, we believe PTT is now undervalued and oversold. We recommend buy for Thai Oil and PTT.

We recommend switching from Banpu to Thai Oil and PTT as Banpu has limited upside potential. Moreover, we still back PTT Exploration and Production as a long-term fundamental stock.

We expect banks to continue gaining in momentum on the market rebound. We believe the current price offers attractive valuation and recommend buy for the large-caps first. We like Bangkok Bank, Siam Commercial Bank and Kasikornbank. Among mid-caps, we favour Siam City Bank on the M&A angle and Tisco Bank because of its cheap valuation and as it is oversold.

Electronics stocks are likely to report good year-on-year earnings, but slightly lower than the last quarter as the second quarter is normally low season.

However, they will benefit in the high-season period beginning in the second half. Also, the weakening of the baht should benefit them and give them higher margins.

We select Hana Microelectronic and Delta Electronics as our top picks.