Still no end insight : brokers

He suggested that if daily trading volume were lower than Bt20 billion for at least four days in a row, it would indicate that capital inflow was drying up.

Thai share prices are relatively high, as seen from the overall pricetoearnings ratio of about 17 times, he said.

The stock market is now close to KGI's target of 625 points for the end of the year. The broker esti¬mates, however, that corporate earnings in 2009 will remain bleak, declining by 29.6 per cent from last year's Bt303 billion.

The SET Index yesterday start¬ed the day with a strong gain and headed further north to close at the day's high of 624.55. Turnover was brisk at Bt33.34 billion.

The local bourse has risen 38.8 per cent so far this year. India's BSE Sensex 30 Index has been the world's best performer, with a 60.33percent gain. Vietnam's Ho Chi Minh has surged 57.63 per cent, the Shanghai Composite Index has risen 54.67 per cent and the Jakarta Composite Index has advanced 35.59 per cent.

"If the Dow Jones within the next week cannot break 8,776 points, a market correction will be seen. If it can do so, stock markets across the world will see a new round of overshooting," Adisak said.

"Both the local and US economies remain poor. The Thai stock market's rally is mainly attrib¬utable to expectation that the world economy is staging a recovery," he added.

An analyst at Ayudhya Securities said the sevenmonth high in the price of crude oil had given a big boost to Thai shares yesterday.

"Stock markets around the world are in the same basket now," the analyst said. 

Ayudhya Asset Management's chief financial officer Prapas Tonpibulsak warned that if a mar¬ket correction did not occur in the third quarter, the Thai stock market would crash and it was possible to see the SET Index at around 500 points next year.

"We still maintain our SET Index target this year at 550. However, it is difficult to predict the target when the market's rally results from an influx of capital," he said.

Prapas's firm still prefers snap¬ping up stocks with high cash flow and offering dividend yields.

According to Citi Private Bank's "The View" research paper, while remarkable, the stock rallies in the US and elsewhere are not particu¬larly surprising, as history shows that market rebounds tend to be proportionate to the selloff that preceded them.

"In analysing the 10 worst US equity bear markets since 1900, we find that the average 12-month gain from the trough is about 60 per cent. The latest bear market ranks as the third worst. So, if history is any guide, the current rally probably has much further to go. With that said, it would be unusual if the market did not experience notable pullbacks on its way up," the paper said.

So far, companies that were hit hardest in the market decline tend¬ed to be those with credit and liquidity issues. But stocks in the com¬panies most shunned by investors during the bear market became those most desired in the comeback, it said.

Measured by the ratio of longterm debt to total capital, said "The View", the 100 most-in-debted companies in the S&P 500 climbed 76 per cent, while the leastindebted 100 gained just 37.6 per cent from the March low through May 28.

"This is not just a US phenomenon, either. Global stocks are fol¬lowing a similar behaviour pattern. Ranking the 1,675 stocks in the MSCI Global Universe by longterm debttocapital metrics, the 20 per cent with the most indebtedness performed best in the March 9 through May 28 period, up 54.5 per cent. The least leveraged had the lowest returns, at 36.2 per cent," the paper said.

However, the model is now in neutral territory, neither bullish nor bearish. "The View" said any future improvement in sentiment could have a less pronounced impact on shareprice performance, particularly in the absence of sustainable fundamental improvement.

"Going forward, we believe company fundamentals such as revenue growth, profit margins and return on equity will be more important than sentiment," the paper said.

First-quarter earnings certain¬ly exceeded analysts' reduced expectations, as many companies achieved positive surprises through vigilant cost control.

Revenue growth, however, is a different story, "The View" said, as businesses and consumers alike kept a tight lid on spending. Accordingly, it will become increasingly difficult to sustain any earnings gains through the remainder of the year without an eventual pickup in sales.