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Market analysts have all eyes on the streets

Anti-government protesters take a rest inside an occupied building at the Finance Ministry. The SET Index will this week be further influenced by politics.

Anti-government protesters take a rest inside an occupied building at the Finance Ministry. The SET Index will this week be further influenced by politics.

During last week, the SET Index moved with volatility, in line with the political developments in the country. It was expected that the situation would ease, but things did not develop so positively.

We expect the local political situation to pressure the SET Index again this week. Three factors should be noted.

First, if no solutions are found to the protesters' demands, this could lead to violence again.

Second, the National Anti-Corruption Commission's review of major petitions may lead to political changes. These cases include the Bt350-billion water-resource management programme and a request for removal of certain people in political positions as a result of the proposed constitutional amendment on the selection of senators.

Finally, the political situation may have repercussions on the Thai economy. Recently, some have forecast that gross domestic product may grow by less than 3 per cent this year, meaning fourth-quarter growth of less than 1 per cent.

The said factors will put pressure on the SET Index consistently and partly accelerate the flow of foreign capital out of the Stock Exchange of Thailand.

Since the beginning of February, foreign investors' net-sells have exceeded Bt170 billion, while accumulated investment, from the beginning of 2012 to now, at totals Bt120 billion in market value. There could be a consistent selling spree, as has been seen in the past.

From the beginning of 2005 to around the second quarter of 2008, foreign investors' net-buys totalled an accumulated Bt310 billion to Bt320 billion (close to the current round of net buys from the beginning of 2009 to February 2013 for accumulated market value of Bt320 billion.) After that, consistent net-sells were seen, dragging the SET Index down to net-buy market value of zero in late 2008. That selling spree took place after the crisis of US financial institutions, the so-called 'Hamburger Crisis'.

ASP Research expects the SET Index' major support level at a price-to-earnings ratio of 14.5 times, based on an assumption of the earning yield gap (market earning yield less one-year bond yield. Its present figure is 2.37 per cent). At that level, the SET Index will be at 1,340 points, with the resistance level at PER of 15 times or 1,385 points.

This week, the SET Index is expected to continue volatile moves with more downside risk than upside. Under these conditions, investment strategy should be set with more caution. Equity holding should be set in a range of 30-40 per cent of total investment portfolio. If the SET Index goes down to the lower bounds, the equity holding could be raised to 50 per cent.

Stock picks: those with high growth and high dividend yield such as SPALI (Supalai; fair value Bt24.22).

Bualuang Securities

The Stock Exchange of Thailand dropped 1.0 per cent week on week as foreigners net-sold against net buying among individual and institutional players.

During last week, domestic political tensions were temporarily eased because of His Majesty the King's birthday celebrations.

For external factors, US gross domestic product rose 3.6 per cent in the third quarter, up from an initial estimate of 2.8 per cent and 2.5 per cent in the second quarter. In addition, jobless claims decreased to 298,000 from 321,000 in the week ended November 30, while the consensus estimated an increase to 320,000. Improving US economic data fuelled speculation that the Federal Reserve will reduce stimulus, which dragged down global stock markets and the gold price while boosting US Treasury yield towards the highest level since September.

Next week, we expect the SET to move in the trading range of 1,350 to 1,370 points. Domestic political unrest is likely to pressure the Thai bourse as the anti-government protesters have already resumed their street rallies.

Kitpon Pripisankit

Vice President - Strategist

Kasikorn Securities

The SET Index retreated on Monday last week and then made a rebound until midweek after violence between anti-government protesters and state officials was kept under control. Thus the local political situation passed its peak in the short term.

The SET Index rose to a weekly high of 1,392.94 points (+1.59 per cent week to date). After that, the index plummeted late last week on two factors. First, the political situation tended to heighten again late in the week after the anti-government protesters announced they would escalate their demonstrations again. Second, there were concerns over the US Federal Reserve's likely reduction of quantitative easing at the Federal Open Market Committee meeting this month.

This week, the SET Index is forecast to move sideways or down on concerns over the protest that will likely heighten and the Fed's decision on QE's likely tapering at the December 17-18 FOMC meeting.

Foreign investors have reduced their holding consistently in the ICT (information and communications technology) and banking groups (NVDRs, or non-voting depository receipts, have seen lower momentum). Thus investment in these groups should be made with caution or temporarily avoided.

The SET Index is expected to move in a range of 1,320-1,380 points (downside is projected at around 1,280 if the political situation becomes uncontrollably violent).

We see the SET Index' retreat to 1,320 points (forward price-to-earnings at 11.5 times) or less as the attractive zone to take risk for a buy.

Overweight accumulative buys in stocks with regular income, no political impact, benefits from the global economic recovery, and low price. Stock picks: EGCO (Electricity Generating), RATCH (Ratchaburi Electricity Generating Holding), BECL (Bangkok Expressway), TUF (Thai Union Frozen Products), CPF (Charoen Pokphand Foods), GFPT, CFRESH (Seafresh Industry), KCE (KCE Electronics) and PTTGC (PTT Global Chemical).

Stocks with likely profit recovery are also attractive. Stock picks: PRANDA (Pranda Jewelry) and TIP (Dhipaya Insurance).


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