MARKET VIEW (MARCH 22-26)

Playing on SET earnings

Investment thesis: Despite the SET's 6 per cent rise over the last week, we believe the Thai equity market will extend its outperformance. The short-term earnings prospects are good and there is potential for upgrades. The SET dividend yield remains attractive at 4.2 per cent�still higher than long bond yields and the regional average yield of only 3 per cent. The index currently trades at price earnings ratio of 11.5 times � a 10 per cent discount on its long-term average. As we are close to the end of the first quarter of 2010, we are tactically focused on firms with relatively stronger earnings growth. We prefer cyclical commodity plays to domestic stocks.

Based on our bottom-up modeling, we are bullish about the prospects for the first quarter of 2010 SET earnings. The aggregate profit of the firms under our coverage is anticipated to jump by 39 per cent YoY and 23 per cent QoQ. Not only will most cyclical commodity plays post robust earnings growth, but domestic stocks will report improved bottom-lines for the quarter. Only Media, Industrial and Commercial firms will report weak numbers.

Within the Thai bourse, Energy is the only sector forecast to report both QoQ and YoY growth momentum and also beat broad market profitability expansion. We anticipate an impressive the first quarter of 2010 Energy sector earnings increase of 45 per cent, both QoQ and YoY. On the domestic front, the scope for bottom-line expansion is more modest.

The Bank sector should post a rise of 13 per cent QoQ and 16 per cent YoY, the ICT sector an increase of 18 per cent, both QoQ and YoY. The Residential Developer sector will post record high the first quarter of 2010 numbers, but in 2Q10 housing sales will decline and SG&A expenses will rise.

TISCO SECURITIES

After some initial weakness due to political jitters, the market has staged an impressive recovery in recent days, with the SET index rising to a new 2010 high of 752 points at the close of trading on March 16. Despite the recent escalation in political tensions, foreign funds continue to flow into Thailand's stock market. Foreigners have been net buyers for 16 consecutive days, purchasing a net total of Bt 29 billion of Thai equities.

We believe foreign investors' confidence is due to two main factors: the relatively peaceful nature of the red shirts' protests (so far) and market expectations that Prime Minister Abhisit Vejjajiva's government will survive the current unrest due to strong support by the military and business leaders and internal conflicts within the opposition leadership;

 Other factors supporting sentiment are the Central Administrative Court allowing more industrial projects at the Map Tha Phut to proceed with construction and the government's decision not to sue telecom operators for losses to the state caused by previous concession amendments.

Meanwhile the economy continues to shows strong signs of recovery. Toyota Motor (Thailand) reported that domestic vehicle sales surged 58 per cent YoY in February, aided by rising agricultural product prices. The ongoing red shirt rallies also appear to have had little impact on property sales.

Latest press reports indicate that many red shirts are returning home to the provinces. Nonetheless, the political situation remains precarious and any outbreak of violence could quickly lead to a stock market reversal. Note that 37 countries have issued travel advisories on Thailand while China, Hong Kong and Malaysia have warned their citizens to avoid all travel to the kingdom. Accordingly, investors will need to carefully monitor political developments as well as external factors that could lead to short-term profit-taking i.e. monetary tightening by China and the Greek debt crisis.

We reiterate our recommendation for investment in commodity companies that will benefit from the global economic recovery and the upturn in domestic consumption.

VAJIRALUX SANGLERDSILLAPACHAI

Executive Director, Trinity Securities

Last week, the SET Index skyrocketed 5.6 per cent or 39.76 points to break the previous high set last year of 758 point. Now, the index is at 774.59. There were no negative issues stemming from concerns over the European crisis or the tightening policy announcement from China. Moreover, internal political tension looked softer than previously thought. Fund inflows continued, driving the market to a new high. The best sector performance last week was the petrochemical sector, followed by banking, ICT and energy.

Daily average turnover for last year was as high as Bt27.16 billion, with foreign cumulative weekly net buying of Bt11.53 billion. We believe that fund inflows will continue and recommend investors continue holding long positions. Window dressing would be another key driver for the SET index until end-March. For this week, we expect a volatile market in line with massive trading volume. We expect the Index range for this week at 747-793 points. We believe that there will not be severe repercussions from the red-shirt rally.

We recommend buy on big cap stocks following foreign fund inflows. We like PTTEP, PTTAR, PTTCH, QH, KTB and SCB.