CHAIYAPORN NOMPITAKCHAROEN Executive Vice President Research Group, Bualuang Securities
The Stock Exchange of Thailand (SET) gained slightly last week on the release - albeit short term - of political tension afforded by the Supreme Court's verdict in the asset-seizure case against former premier Thaksin Shinawatra. The telecom sector saw heavy selling on fears of government legal action following the verdict, the results of which are unclear. We suggest investors wait and see.
We expect external factors will outweigh domestic factors this week. The SET should recover to 750 this week ahead of the red-shirt rally on March 12. Key drivers are: an austerity plan devised by the indebted Greek government to restore confidence, which has seen fear of debt defaults in EU countries decline; and the US Fed chairman's insistence that the period of low interest rates will be extended as recent economic data have been mixed. Stock picks: STPI, TICON and SCC
TISCO SECURITIES
Despite four grenade attacks at bank branches in Bangkok after the Supreme Court's decision to confiscate Bt46 billion in assets from former premier Thaksin Shinawatra, the stock market rebounded after a sell-off ahead of the court ruling. The market appears to have priced in the ruling as well as the reaction of the former premier and his supporters. Fund flows have returned to the region, causing the SET index to bounce 7 per cent from its low early last month. This is in line with gains in regional markets of 3 to 9 per cent during the same period.
The political situation remains uncertain as pro-Thaksin red shirts have vowed to stage a major rally in Bangkok on Sunday. This event could cap the upside for the market in the short term. Key factors to watch out for are the size of the crowd (Thaksin supporters claim they can mobilise up to a million people) and the ability of the government to prevent outbreaks of violence. If the rally passes off peacefully, the SET index could see a new test of its previous high for 2010 of around 750 points.
Economic numbers in January remained positive, especially for private investment, manufacturing orders, consumer spending and tourist arrivals. Production of manufactured/processed goods fell on-month, but was still strong compared with the same period in previous years. Based on the momentum of economic recovery seen so far, we maintain our GDP growth estimate for this year at 3.9 per cent year-on-year.
Earnings in the fourth quarter of 2009 have so far been quite mixed. Consumption-related companies showed better-than-expected results, while the construction and petrochemicals sectors posted rather disappointing earnings. The upward momentum in earnings revisions has slowed recently and may not pick up again until next month.
Domestic political uncertainties should increase buying interest in stocks that are plays on the global economic recovery. Stocks with high dividend yields also offer a good degree of protection during periods of market volatility. We also like consumer-related plays with robust growth prospects.
VAJIRALUX SANGLERDSILLAPACHAI Executive director of research, Trinity Securities
The information and communications technology sector was a disappointment last week, dropping 9.7 per cent due to the impact of the ruling in the Thaksin Shinawatra assets-seizure case that SHIN, ADVANC and THCOM received direct benefits from Thaksin's political power. We believe that foreign investors and institutional investors should reduce weight in the sector due to further risk of retrospective penalties over concession amendments.
For this week, we are still concerned about the vulnerability of the SET Index to the effects of the SHIN case. Investor confidence has been hurt by several global factors. We are concerned that China will raise its policy interest rate in the near future, after Australia and Malaysia increased rates last week. In Europe, Greece's sovereign debt trouble remained the key concern for stock markets. We believe that trouble is still pending for the euro zone economy, and this will depress the global stock market.
We believe that the SET Index will be influenced heavily by global factors. For commodities, we expect oil prices will stay on an uptrend. We recommend buying PTTEP and TOP. For the banking sector, based on expected strong earnings performances, we recommend buy on weakness. We also like KCE, DELTA and SAT, thanks to strong export recovery, especially in the electronics and automotive sectors. We expect the SET Index to stay in the 717 to 735 range this week.
