Stock Outlook

The Thai stock market's movement last week did not bear much correlation with that of overseas bourses, due to the different impact on the real sector in each country.

Asia Plus Securities estimates that Thailand is not feeling severe effects from the US financial meltdown but there is no end in sight to the local polit¬ical problems, which we believe will be the main factor affecting local equity markets.

Factors that need to be closely watched this week are:

The local political situation could heat up again and might lead to major developments, including legal suits against the People Power Party and the prime minister.

There could well be a cut in earnings estimates following thirdquarter profit announcements. Listed companies releasing their quarterly results had a combined net profit of Bt74.86 billion, flat year on year.

Although the stock market is under pressure, shares have very cheap valuations with an average pricetoearnings ratio of seven and pricetobook value of 0.8, compared with 0.7 during the financial crisis of 1997-8.

The SET Index is expected to make a gradual correction in a range of 400 to 450 points. Investors are recommended to pile up high dividend yield but low beta stocks, including Dynasty Ceramic, MCS Steel, Advanced Info Service and BEC World.

Kim Eng Securities (Thailand)

We recommend investors to buy shares on weakness and look to sell them again on index swings in what we con¬tinue to believe is a trader's market. Stocks failed to break 460 points last week and are likely to correct to within the 420440 range and later rebound, based on the following factors:

Thailand's economy will be hit by the global slowdown. We forecast 2009 growth in gross domestic product at 2.9 per cent.

Global equities are trading in a more stable range.

With central banks and countries around the world coordinating unprece¬dented liquidity injections, bailouts and interestrate-cutting measures, global markets appear to have also factored in recession fears, and equities may further attract bargainhunting investors.

As to stock strategy:

STAY with blue chips: Kasikornbank (a net interest margin and lending growth play) and PTT (largest diversifiedearnings base play).

TRADE BLUE CHIPS (shortterm trading ranges in parentheses):

1) PTT Exploration and Production (Bt90Bt110): sell on oilprice weakness

2) Banpu (Bt195Bt225): sell on fuel price weakness

3) Land & Houses (Bt3.40Bt4.50): buy on foreign fund inflows

BUY HIGHBETA stocks within wide, shortterm trading ranges:

1) Quality Houses (Bt0.90Bt1.10): on housing growth

2) ItalianThai Development (Bt2.40Bt3) on falling material costs, project bidding potential

3) Bank of Ayudhya (Bt10Bt14) on rising netinterest margin and GE's backing

4) Thoresen Thai Agencies (Bt12Bt18) range on Baltic Dry Index rebound and vesselacquisition potential

Sukit Udomsirikul

Assistant Managing Director, Siam City Research Institute

The SET Index will be volatile this week. The G20 meeting, expected to produce additional measures to stimulate the global economy, should give a boost to the stock market, but this will not be significant as most of the measures have already been announced.

The US financial crisis is more complicated, as the problems have spread into the real sector, including automobiles and information technology. The US government announced plans to shift half of the US$700billion (Bt24.6trillion) rescue package to relieve consumer credit instead of buying up toxic mortgage assets, and this could delay a turnaround in the US economy. Moreover, the layoffs seen around the world are eroding investor confidence.

Thai listed companies' 2009 and 2010 earnings estimates will be trimmed following their thirdquarter earnings announcements. Stocks related to property, hotels, industrial estates, autos and electronic parts are less attractive for investment, while energy, banks, communication, food, retail and hospitals remain sexy.

Thailand's grossdomesticproduct growth forecast is likely to be cut after the International Monetary Fund and the World Bank slashed their global GDP estimates last week. The Bank of Thailand and Siam City Research Institute are reviewing their forecasts, with the latter estimating GDP growth next year at 3.3 to 4.3 per cent.

It is highly possible there will be a Cabinet reshuffle soon.

We recommend investors use a waitandsee strategy for this week's investment.