Bear market rally to end soon

Pichai Lertsupongkit, executive vice president of Thanachart Securities, said at a seminar held at Money Expo 2009 that ThanachartBNP Paribas Peregrine had upgraded equity markets in Asia with the exception of Thailand, as they see an absence of significant factors driving the country's economy in the medium to long term.

"We estimate that 530 points is the appropriate level for the SET Index in the next 12 months, based on the country's fundamentals, as there are no positive factors in the overall picture. The current index is line with the forecast, and it is likely to go down to be in line with its fundamentals," he said.

The SET Index has shot up 28 per cent since the year's low of 411.27 in March, reaching 527.72 yesterday. The recent sharp rise can be ascribed to capital inflow to the Asian stock markets, triggered by signs of a US economic recovery.

There were positive signs over the past two months from the manufacturing sector that many sectors were resuming operations after suddenly cutting back on production in the fourth quarter last year, Pichai said. However, it will take three to six months to identify whether the global economy has passed the bottom, as purchasing power remains fragile.

He said investors should keep a close watch on the stress-test results of the 19 largest US banks - due to be announced after press time yesterday - and developments in the auto industry, particularly Chrysler, which recently filed for bankruptcy.

He suggested investors should adopt a waitandsee strategy and start scooping up shares when the local market is in correction.

Investors should accumulate stocks with few competitors or a monopoly situation, a promising outlook and competent executives.

Advanced Info Service is his house's top pick, as it will benefit from the development of its 3G network. If the 3G project is viable, AIS's fair value will be raised by 15 per cent from Bt100, he said.

CP All also has high business potential if it can enter the Vietnamese market, he added.

Pichai said investors should buy Banpu stock on weakness, as the company has locked its selling prices in advance and has a sufficiently high cash flow for future investment.

Waraporn Wiboonkanarak, head of research of KT Seamico Securities, said the SET's upside was limited following the sharp jump of the past few weeks.

Investors should wait to buy Thai stocks on weakness, she said, adding that the SET Index should be volatile from this point on as the stock market's recovery would depend on the US economic recovery.

She recommended that investors snap up stocks with high cash flow from operations, including AIS and PTT Exploration and Production.

AIS is a dividend play and its 3G operations - slated to begin operations late this year to early next year - will also come as a boon to the stock, she said.

Investors should avoid petrochemical stocks, as the cyclical downturn in the sector should last another two years and a large amount of new supply will come on stream soon, she added.

Industrial estates is another sector investors should stay away from, because there is as yet no sign of recovery in private investment, said Waraporn.