Low investor confidence casts shadow over market

Therdsak Thaveeteeratham, Senior Vice President, Asia Plus Securities

The SET index's fluctuations last week were very wide, particularly in the late part of the week.

If one takes market fundamentals into account, the SET index is ready to surge based on an estimated GDP growth of 5.56 per cent, earningspershare growth of listed companies this year of 33 per cent and the estimated price to earnings at the end of 2008 at nine times.

The SET is ready to rally if the global stock mar¬ket surges and the local political tension eases.

Investor confidence is low, as witnessed by the fact that sell¬ing pressure will occur shortly after a rally.

Asia Plus Securities estimates local factors that are pressuring the stock market will be alleviated this week after Mother's Day and the Olympics opening. However, investors should keep an eye on overseas factors, particularly in global stock markets, the volatility of which continues, and foreign investors' net sales of shares.

The SET index is expected to move in a range of 660700 points this week and we expect to see speculation stocks show impres¬sive earnings in the second quarter. These stocks are Land & Houses, Asian Property, Property Perfect, Banpu, PTT, Thoresen Thai Agencies, Thai Metral Trade, Charoen Pokphand Foods, GFPT, and Thai Vegetable Oil.

For longterm investors, we recommend they buy highdividend plays, given that these have strong fundamentals and financial posi¬tions and make profits consistently. Their prices are always lower than fundamentals. Supalai, Samui Airport Property Fund, TMT, CalComp Electronics and Advanced Info Service.

Kim Eng Securities (Thailand)

Stocks may retreat at the open after a big 4.3 per cent bounce last week, and then retest the 700point level.

Despite the surge in trading volume and the market breaching the 700mark, losses on Wall Street and the government's feud with the BOT over raising interest rates instead of sup¬porting a stronger progrowth monetary poli¬cy, are negative factors.

But a lower inflation outlook for the second quarter, a stable baht, resilient corporate earn¬ings, and the market having significantly dis¬counted political risks are factors likely to help sustain healthy trading volume.

Traders may look to SWITCH OUT of plays like PTT Aromatics and Refining and IRPC, Bank of Ayudhya (a strong earnings turn¬around banking play), ItalianThai Development (on bidding starting for a mass transit line) and Thai Tap Water Supply (on its stable growth and expanding capacity) to buy select blue chips like big banks, PTT, PTT Exploration and Production and Land & Houses.

Weaknesses may creep in for property plays and we believe this is a buying opportu¬nity.

Advanced Info and Total Access Communication may outperform other blue chips today on their strong secondquarter results outlook, interim dividends and resilient operations in the second half.

Sukit Udomsirikul, Assistant Managing Director, Siam City Research Institute

The SET index will fall this week as shortterm profit taking will occur after a shareprice surge on the speculative buying theme for the secondquarter earnings pending announcements. The baht depreciation along with the US dollar appreciation is a new factor to be followed up.

If baht fluctuation is height¬ened, foreign investors' selling spree will not come to an end and the currency factor might escalate inflationary pressure.

According to history, sell on fact always happens after cor¬porate earnings announce¬ments. We forecast that the property sector is at risk of shortterm profit taking.

The baht last week weakened to its lowest level in the past seven months after Japan and European economic indicators signalled an economic recession.

Crudeoil prices have a chance to recover in the short run this week following a sharp decline over several weeks.

Also, the CRB index, indicating the whole picture of commodity prices, last week dropped 16 per cent from its peak and this led to volatility in oil, coal, agriculture, steel and shipping stocks.

Foreign investors started to buy stocks in some Asian markets including India and Vietnam. For the SET, they will come back if the political situation clears and inflation begins to slow.

We recommended reducing portfolios when share prices increase.