STOCK MARKETTHAI SHARES STEP ON ACCELERATOR Up 3%

The move to take over Fannie and Freddie, and local speculation that the Thai government would lift the state of emergency in Bangkok soon, boosted the market.

The baht also briefly strength¬ened against the dollar from its lowest level in more than a year, in tan¬dem with eight other mosttraded Asian currencies outside Japan. The US takeover decision spurred optimism that foreign investors will return to buy emergingmarket assets.

The baht appreciated to the day's strongest level at 34.33 against the greenback in the morning before weakening to 34.52 at 5.16pm in Bangkok.

The Taiwan Taiex Index was the top gainer in the region, jumping 5.57 per cent. The Kospi rose 5.2 per cent to 1,476.65, Singapore's Straits Times Index climbed 4.7 per cent to 2,694.49 and the Hang Seng Index rose 4.3 per cent to close at 20,794.27.

The SET Index started the day with a strong gain and kept rising to close at the day's high of 665.66. Turnover, however, was moderate at Bt12.30 billion.

Despite the surge in Thai shares, foreign investors yesterday sold Thai shares with a net position of Bt1.24 billion. So far this year, they have sold Thai shares with a net value of over Bt100 billion.

The energy sector enjoyed the biggest increase among other sec¬tors, rising 8.14 per cent, while the banking sector was the second at 4.02 per cent.

Among the big gainers were PTT rising 3.3 per cent to Bt248, PTT Exploration and Production 5.3 per cent to Bt139, Banpu 5.2 per cent to Bt364, Bangkok Bank 5.45 per cent to Bt116, Bank of Ayudhya 5.05 per cent to Bt20.80, Siam Commercial Bank 4.11 per cent to Bt76 and Kasikornbank 2.19 per cent to Bt70.

Prasert Bunsumpun, chairman of the Federation of the Capital Market Organisations, said at an urgent meeting yesterday that the federation had urged the government to cancel the state of emergency at the earliest as it eroded investor confidence.

"I would like all parties to find a solution as soon as possible. If the state of emergency is unnecessary, it should be cancelled," he said.

Local political tension was the main risk factor for the country's gross domestic product (GDP) growth and if the instability dragged on, it would shave off growth and hurt capital mobilisation for the corporate sector, he said.

He cited his firm as an example. PTT had originally planned to raise Bt10 billion by issuing bonds to for¬eign investors in the second half this year but switched to mobilise local funds instead due to the mounting political turmoil.

"Several companies need fresh funds and they might have to mobilise funds from the local market and liquidity might be tight," he said.

Stock Exchange of Thailand president Patareeya Benjapolchai said during the federation's conference that foreign investors' confidence in the Thai stock market had been undermined, as shown by the fact that the SET Index had slumped almost 27 per cent since the 52week peak at 884.19.

Market capitalisation of the Thai stock market had shrunk 25.73 per cent to Bt5.11 trillion as of September 5, 2008 since the People's Alliance for Democracy staged a rally in June.

Bualuang Securities vice president Pongrat Ratanatavanananda separately said the euphoria might last a few days but the gains would be limited as political risk remains.

Investors should keep their eyes on today's court verdict on whether Prime Minister Samak Sundaravej should be disqualified over accusations that he accepted money as host of a cooking show during his official tenure, she said.

"We recommend [longterm] investors to pile up stocks now," she said.

SCB Securities said in a strategy note released yesterday that it expected Parliament dissolution as the most likely scenario and it was expected it would be dissolved before the end of September.

The broker said this option was quite realistic because: lIt allows the government to remain in control for the next 90 days, which also covers the first quarter disbursement of the 2009 fiscal year budget

It makes illegitimate any further PAD disruption

There is a good chance that PPP will be returned to office by the voters (though perhaps under a different name).

A clear political path after dissolution offered an opportunity for a shortterm rally, SCB Securities said.

The broker recommended investors snap up stocks expected to outperform the market during the rebound and these stocks included Bangkok Bank, Kasikornbank, Thai Oil, Total Access Communication, CP All, Bangkok Dusit Medical Services, Minor International, Asian Property, Preuksa Real Estate and Thai Stanley Electric.