Market View: May 10-14

Internal and external risks will pressure foreign selling throughout Asia in this and next week. However, we believe that the SET Index will stand above 740-745 points in the near term. Still, investors are advised to focus on stocks which will benefit from domestic economic recovery, like MINT, ADVANC, GLOW, DTAC, TCAP and SAT.

Though political tension apparently eased last week after the government proposed the 5-points roadmap, which would lead to the election on November 14. However, despite initial supports from coalition parties, the red shirt demonstrators have not yet confirmed when the anti-government protest at Rajprasong will end. They insisted that the protest would continue until it became clear when the government would dissolve the House and when the exact election date will be set. Some politicians have voiced opposition to the roadmap, as well as the People's Alliance for Democracy (PAD) which urged the prime minister to abolish the proposal on the belief that it obstructs the democratic development. As such, political risks still persist, as long as the clarity on this issue is missing. This should further lead to foreign selling throughout the next month.

Aside, the market suffers from external factors particularly the debt crisis in the European Union which led to the downgrading of several countries. The Euro has weakened significantly against US dollar, to US$1.252 (the historic low in 2009 was $1.2455 per euro). The crude oil price plunged 14 per cent in a week and foreign investors heavily dumped Asian shares. During the last four trading days, Taiwan suffered the most, followed by South Korea, Japan, India and Indonesia. Asian currencies also weakened sharply against the greenback, led by the Australian dollar which depreciated 4.92 per cent. Following were the won, ringgit, peso, Singapore dollar, rupiah and rupee which weakened 4.88, 3.22, 3.19, 2.76, 2.75 and 2.09 per cent, respectively. Escaping the calamity were Thai baht, Hong Kong dollar and yuan which stabilised against the greenback. (Hong Kong dollar and yuan are pegged to the dollar). Only the Japanese yen appreciated around 3 per cent. The Thai baht is expected to weaken if panic selling continues in Asia.

As the market is correcting, we stilll believe that the global economy would maintain the recovery momentum. Thus, the weaker indices opens the buying window. Investors should split their portfoilio in half for cash and stock investment. Top picks are the domestic plays which will enjoy from the domestic recovery and least affected by the global chaos.

We believe that in the short term, the index could rebound as the market so far can stand above 760 points.

Kavee Chukitkasem

Head of Research, Kasikorn Securities

In the past week, the SET Index was significantly volatile though there were only three trading days due to the political chaos as well as the European debt crisis.

Early last week, the market rose significantly following the prime minister's roadmap which won supports from many parties. However, the market slumped due to the debt crisis in Greece. Despite the assistance plans by the International Monetary Fund and European Union, investors remained conconcerns if the plans would bail Greece out from the crisis. Worse, they feared that the crisis will spread out to other countries in Europe and put a brake on the global economic recovery.

The EU debt crisis will influence market movement in the medium term. There are several solutions, but the west way is to have the EU and IMF lend to Greece. But the worst solution was the break-up of the Euro zone. Whichever, the euro would weaken against the US dollar as investors are shifting to safer investment bets. Though Greece will win financial bail-out package this year, but the economy maintains no strength to support its position in the Euro zone. The crisis sent a medium-term shockwave to the global stock markets and commodity markets. In this situation, investors are recommended to reduce their investment size. The SET Index could slide to 670-690 points. Stocks recommended for investment at the moment are TVO, TUF, CPALL, TTW, PTTEP, and CPF. This week, equity markets could take a short-term rebound, due to the significant drop last week.

 Internally, there could be progress in ending the political conflict. While the protesters may stop the protest, listed companies' positive earning results should boost the market sentiment.