SET may rise further on improved sentiments.
Chaiyaporn Nompitakcharoen
Head of research, Bualuang Securities
The SET should deserve for re-rating after Map Taphut was unlocked last week. We expect the SET will rise further this week with resistance at 960. Investors may mind on the SET index trading near its three-year high of 925 but we still view positive on market given that 1) investment at Map Taphut will resume, which can support for economic growth, 2) despite the SET is at PER of 13x, brighter economic outlook for 2011 and favorable political climax could become strong reasons for Thai stock re-rating, 3) negative real interest rate (inflation rate over three-month deposit rate) remains a key push for stock market liquidity. The global headwind factors have eased. Doubts on US economic double dip is faded out after the Fed released strong words to fight for economic growth. It implies that the US Fed will extend low interest rate policy until mid next year. Furthermore, Chinese Central Bank is expected to end tightening policy soon before YE'2010 given several economic readings get back to normal. Stock picks: TICON, AMATA, CK, SCC, KTB, PTT
Chirasit Vuttigrai (pic/16025189)
Deputy Head of Institutional research, DBS Vickers Securities (Thailand)
Liquidity will push SET Index to 1,100
Economies remain sluggish in developed countries but Thailand continues to surprise on the upside. Our economist upgraded Thailand GDP growth twice within a month (now 9.0% for 2010 and 4.0% for 2011).
While the first Fed funds rate hike should slip to 3Q11 from 1Q11 earlier expected, Thailand's policy rate has been raised since July 2010 with a total of 100bp hike expected in 2H10. The wider and longer US-Thailand interest rate gap should attract more fund inflows into Thailand. Concerns on an economic bubble burst in China makes Thai market even more compelling, and this trend should continue over next 6-9 months.
Historically, abundant liquidity in the market had always pushed the stock market up substantially, sometimes beyond fair levels, like in 1993, 1999 and 2003. We expect (i) Thailand's superior growth outlook vs developed economies, and (ii) ample liquidity in the market, to continue to push the SET Index up to our new target of 1,100, based on 14.0x FY11PE (+0.5 sd of its 8-year average) within the next six months.
We Overweight Banks, Construction-related, and Industrial Estates, and recommend investors pay more attention to small/mid cap stocks, which normally performed better than large caps in the liquidity-driven leg.
Our top picks include Bangkok Bank (BBL TB), KASIKORNBANK (KBANK TB), Siam Cement (SCC TB), Sino-Thai Engineering & Const. (STEC TB), Amata Corporation (AMATA TB), Hemaraj Land & Development (HEMRAJ TB), Thai Union Frozen Products (TUF TB), Thai Vegetable Oil (TVO TB), Quality Houses (QH TB), LPN Development (LPN TB), and Major Cineplex (MAJOR TB).
Tisco Securities
Strong fund inflows propel SET to 14-year highs
Robust foreign fund inflows helped push the SET index to 14-year highs last week, with investor sentiment buoyed by recent upgrades to GDP forecasts by government agencies and moves by the government to end the one-year overhang from the Map Tha Phut dispute. Foreigners bought a net total of Bt25.6bn of Thai equities between July 23 and September 1, a stark contrast to their massive selling spree during the political crisis in April and May.
Given the stronger baht (which is at 29-mth highs, aided by rising interest rates) and the more favourable economic outlook, we expect this trend to continue. However, the market may soon see a brief period of consolidation after rising 24 per cent over the last three months. Note that the SET is currently trading on a price-earning ratio (PER) for 2010-11F of 13x and 11x respectively, which is in line with multiples of 13.3x and 11.4x for the region.
Nonetheless, news flow remains positive with the BOT last week releasing impressive economic numbers for July showing a 22.1 per cent YoY rise in the private investment index (PII) and a 14.9 per cent YoY increase in foreign tourist arrivals. Although a slower pace of growth was seen for household spending, merchandise exports and manufacturing activity, the Thai economy remains in good shape with supporting factors i.e. faster disbursement of the SP2 budget and rising farm income, for higher growth in future.
The latest economic indicators, coupled with data showing that inflation pressure remained modest in August, should help the banking sector continue to outperform the market. We have also become more optimistic on construction plays and expect stronger domestic demand for asphalt following the Department of Highways' plan to construct five motorway routes worth Bt179bn during 2011-21.
VAJIRALUX SANGLERDSILLAPACHAI
Executive director, Trinity Securities
Last week, the market rose dramatically due to the big stocks turned to lead market. The most of Map Ta Phut overhang projected was released by the order of the Administrative Court on 2 September 2010. It will make many companies in energy, petrochemicals and banking sectors be released. PTT, PTTCH, SCC, are the major stocks involving Map Ta Phut Court Case and now they are unlocked.
This week we believe the market is ready to peak due to overbought with the market PER 14.3 times. The interesting and smaller risk stocks are banking sector. This week we recommend overweight Banking and industrial estate that reaps benefit from buoyant of auto industry. We prefer KTB, SCB, AMATA, ROJNA, SAT, and SSI. Selective 3G on ICT sector play, we choose TRUE.