Stock Outlook

Therdsak Thaveeteeratham

Senior Vice President, Asia Plus Securities

The lendingtodeposit ratio rose to 95.90 per cent (excluding bills of exchange) at the end of the second quarter, and the com¬mercial banking system has set a target to see loan growth of 11 per cent this year, giving the message that high demand for deposits will continue. The cur¬rent deposit mobilisa¬tion competition among banks will be a driving force for lend¬ing interestrate hikes without relying on the central bank's policy rate.

Also, an MPC rate increase might be important in sending a signal over the management of inflation and pre¬venting the baht from weakening too far.

We think the local stock market will come under pressure this week, regardless of whether the MPC increases the policy rate. Interest ratesensitive sectors such as property developers, and high debtleveraged companies, might be sold.

The unravelling of the US subprime woes will still impact global stock markets.

The SET Index's support and resist¬ance levels this week are expected at 660 and 700 points.

Outstanding stocks this week are: CalComp Electronics (Thailand), as the third quarter is the high season for exports and the stock offers a highpaying dividend yield; Erawan, as the company is entering its high season; and Precious Shipping, which will reap benefits from the rise in freight rates expected after the Beijing Olympics.

Kim Eng Securities (Thailand)

The market is expected to trade sideways up this week. Trading activ¬ities should pick up next week on mar¬ketmoving news, including the release of the second quarter data on grossdomesticproduct growth on Monday.

Foreign investors' selling spree, the trade deficit reported for July, politi¬cal risks and a slowing global econo¬my still cast a dark cloud over the stock market this week.

We expect secondquarter GDP growth to be relatively strong at 5.9 per cent and the market expects the Bank of Thailand's Monetary Policy Committee to raise its oneday repur¬chase rate by 25 basis points to 3.75 per cent. We are raising our GDP growth projection for 2008 from 5 per cent to 5.5 per cent, due to anticipated lower inflation and resilient exports.

Bank lending (nine banks under our coverage) in July rose 0.4 per cent month on month to Bt22.4 billion. New lending in the first seven months reached Bt395 billion, up 8 per cent year on year, which is a satisfactory rate.

NYMEX crude prices soared 4.9 per cent late last week on tight supply, a weakening dollar and USRussian tensions. Gold and other commodities rose as a result, as money flowed back into commodities.

Energy big caps PTT, PTT Exploration and Production, and Banpu should make gains this week.

We recommend trading in energy blue chips and accumulating big banks and hightrading beta shares - includ¬ing ItalianThai Development, Bank of Ayudhya and Quality Houses - on weakness.

Sukit Udomsirikul

Assistant Managing Director, Siam City Research Institute

The stock market's movement this week will be sideways down, as the selloff by foreign investors is expected to continue. Prices of commodities - par¬ticularly crude oil, which might reach US$130 (Bt4,420) a barrel - tend to recover in the short run and this would perk up stocks related to commodi¬ties, including oil, coal, shipping and steel.

We forecast that the Monetary Policy Committee will jack up the oneday repurchase rate by 0.25 basis points in today's meeting in order to boost confidence that interestrate increases can control inflation.

Wall Street is likely to fall and the US dollar could depreciate this week if Fannie Mae and Freddie Mac fail to refinance their $225billion debts by the end of next month. The two companies' financial problems will put pressure on Wall Street and global stock markets, as well as the greenback in the short run, and this will be the major stumbling block for foreign investors wishing to reenter stock markets.

The baht is likely to rebound this week after weakening to an eightmonth low last week.

However, the unit will in the longer term depreciate, as the trade surplus will narrow.

We recommended that investors slow down their stock investment. However, commodityprice increases present an opportunity for specula¬tion in coal and oilrelated stocks. We recommend PTT, PTT Exploration and Production, and Banpu.