Therdsak Thaveeteeratham Senior Vice President, Asia Plus Securities
Political situation remains the priority to watch this week, as it would affect the economic recovery.
Two scenarios are possible. First, House dissolution (which is the least unlikely) which would delay infrastructure investment and other investment projects. The SET Index could head up in the short term due to lower political tension.
Second, the demonstration could continue on Monday without the House dissolution and with violence last weekend. Investor confidence will be affected and share prices would fall. Political conflicts will remain a pressure on the market, as the no-confidence debate is planned.
Capital inflows are now the major market drive. From February 17 to March 11, foreign investors' buys are as high as Bt26.6 billion over their sells. Facilitating the fund flows could have been the appreciation of the Asian currencies, including Thai baht in line with interest rates, which offered arbitrage gains. Or it could be the cheapness of the Thai market where price-to-earning ratio is at 12-13 times and dividend yield of 4 per cent. Fund flows should continue if the political situation does not descend to violence.
Overall, volatility will remain. Investors looking for short-term gains should wait and see, while those looking for long-term gains should start to buy when the index softens to 700-710 points. Focus should be on stocks with inflation hedge, like oil companies (PTTEP and TOP) or companies of which performance moves in line with inflation like TTW.
Kavee Chukitkasem
Head of Research, Kasikorn Securities
Political concerns led to sharp volatility in the Thai stock market in the past week. The Thai market failed to catch up with the big increases overseas, which indicated the influence of domestic political conflict on the market's direction. Though, foreign investors remained net-buyers in Asia, including Thailand, on consensus that the US Federal Reserve will raise the policy rate in November. Fed Chairman Ben Bernanke's remark that fed fund rate would stay low for a while also led to weaker dollar and returns of foreign funds into risk investment bets. Commodity prices and stock prices globally rose last week. Moreover, China's affirmation that the economy would grow at least 8 per cent with full readiness to inject money into the system when needed also eased investors' concerns.
This week, volatility should persist due to the political factor. Without violence, the SET Index could touch 750-758 points on buoyant global economic indicators. Even if violence takes place, the index should not fall below 688 points thanks to continued capital inflows.
In April, despite the violence, the market was resilient as institutional investors stood ready to buy up shares when prices drastically dropped on confidence that the Thai and global economy would further recover.
In the short term, investors should stay alert. They should stand ready to stop loss when the index falls past 714 points. Yet, lower index also presents a good opportunity to accumulate shares. We believe that in the latter half of this year, the index could rise further to 840 points, as the world bounces back from economic downturn.
Sukit Udomsirikul
Siam City Research Institute
The market should be highly volatile this week, when the Index should range from 696 to 750 points. The Index could head upward early in the week, on condition that the political demonstration did not lead to violence during the weekend. There is a tendency that the purchases of institutional investors, local and foreign, would outpace their sales.
However, in a case of violence, the Index could weaken to the 696 points level, which presents a good chance for investors who look for long-term gains.
SCRI estimates that foreign capital inflows into Asia would continue throughout this year, as Asia has demonstrated clear economic recovery. Moreover, no Asian financial institutions are meddled in a crisis and no country has shown serious troubles with the fiscal deficits. This indicates low risks of credit rating downgrades. Meanwhile, foreign investors have a chance to reap foreign exchange gains, as the interest rates in Asia are expected to rise soon. Still, the US's consideration to impose some rules on banks' risk asset investment could pose a threat on the capital inflows.
This week, investors should pay attention to:
1. China may impose some rules to stem the overheating economy, as some indicators demonstrate lack of stability like the higher-than-expected consumer price index.
2. Greece's financial crisis remains in concern, despite confirmation from Germany and France that Europe is ready to help ease the crisis. However, there is no concrete measure, which led to the volatility in the dollar/euro exchange rates. Local demonstration against the government's plan to cut fiscal deficits would be a major threat to solve the crisis.
3. Political demonstration in Thailand. Following the gathering last weekend, the protesters may continue their protests this week.
4. The US Federal Open Market Committee will convene on March 16. Markets expect the Fed to maintain the rate at this meeting, but the monetary measures may be stepped up, through non-interest means. The dollar could appreciate as a result.
5. The Bank of Japan will also convene on the same day. The relaxed monetary policy could continue, which would further weaken the yen.
Leading the market this week should be energy and banking stocks. Those in the tourism and transport sectors could see continued improvement, if the political protest showed no violence.
THAI has past its worst on continued recovery in the tourism sector as well as least impacts from the political protests. Cabin factor in the first quarter could hit the historic record of 80 per cent. Despite high debt to equity ratio, the capital increase in the second quarter should help lower the ratio. Buy, when the price is at Bt30.
TOP should also benefit from the recovery in the refining industry. The refining margin in Singapore remains at US$5.07 per barrel, top of the estimate for the first half. TOP will gain the most from its biggest and most efficient operations. As aromatics spread weakened in the past two weeks, attention shifted from PTTAR to TOP. The company's share price has a tendency to rise 22 per cent to Bt55.
