Stock Outlook

Chaiyaporn Nompitakcharoen

Head of Research,

Bualuang Securities

Investors are focusing on whether the US Congress passes the full proposed financial bailout package. If the plan goes through, global equity markets, including Thailand, will likely enjoy a shortterm rally.

Bad news involving collapse of financial institutions will likely fade out for a while, but the financial contagion still exists.

I suggest a nottooaggressive approach even on stocks that are mostly trading cheap. Foreign outflows should continue, as market perception is biased towards a strong US dollar against Asian currencies. From a technical standpoint, the market has already fallen to a strong support target during last week.

Technical indicators show positive bullish divergence. Unless there is negative surprise, markets will move sideways.

Tisco Securities

Attractive valuations despite

rise in economic risks

The Thai market has taken a hammering lately along with regional markets as the credit crisis rumbles on and fears of a global economic downturn deepen. As a result, the country's political troubles have taken a back seat, with the market currently focusing on the US government's US$700billion bailout plan. Even if the bailout is approved, global markets will still be worried about a further slowdown in the US economy following this month's collapse of Lehman Brothers, the Federal Reserve's rescue of AIG and the steep decline in US home sales and prices.

Nonetheless, we believe Thailand is more resilient to a prolonged global slowdown than many other countries in the region. The absence of speculative bubbles in the Thai economy (mainly due to two years of political uncertainty) suggests limited downside risk to operating profits in the near term.

The market's forward pricetoearnings ratio (PER) of 8.2 is even lower than that seen during the previous low in 20045, and we believe Thai equities offer good value at their currently depressed levels. We also expect the SET index to swing back to 850950 points next year, which implies a PER of 1011 against the Thai market's longterm average PER of 11.5.

Given the ongoing pressure from external factors, we advise investors to heavily weight defensive stocks in their portfolios. For investors who take a more bullish view of a recovery in the market, high betas such as banks and property should yield better returns.

Vajiralux Sanglerdsillapachai

Executive Director,

Trinity Securities

Another Bad Day

It was another bad day for the global stock market due to uncertainty over the proposed $700billion bailout plan. Our strategy for this week is to wait and prepare to get into the market when the stock meltdown approaches 600 points.(605, 590 and 580 points are expected.) Big bad news could come from the US market and smaller bad news from domestic econom¬ic figures. We expect a tradebalance deficit and currentaccount deficit in August, which will be revealed tomorrow. While inflation in September is expected to be 67 per cent, it won't be enough to attract the short-term market.

We recommend selective "buy" in some stocks with strong cash flow and excellent history, including Bangkok Expressway, Rojana Industrial Park and Khon Kaen Sugar Industry.

BECL has a free cashflow yield of 13 per cent, almost the strongest in the market.

Rojana has sustainable earnings through utilities, small power plants and land sales of 576 rai, approaching the tar¬get of 600 rai. As far as Khon Kaen Sugar is concerned, expect a strong outlook in the ethanol business and carbon credits, whose contributions will be seen in the first half of 2009.