Market View: Oct 31-Nov 4

Therdsak Thaveeteeratham
Senior Vice President
Asia Plus Securities

The SET Index last week advanced over 6 per cent, supported by the clearer solutions to ease the financial woes in the euro zone. Aside from 50 per cent haircut on Greek debts, European governments will help recapitalise affected banks. The European Financial Stability Facility’s capacity is enlarged. Driving the market further were better-than-expected earning results of large corporations in the US and Europe. The Thai and Asian markets benefited from the positive sentiment, and foreign funds started to flow back to the markets. For four days, foreign net-buys in Thailand totalled Bt8.23 billion. During Sept 30Oct 27 their net-buy positions reached Bt28.2 billion.
The two factors would further boost the Thai market this week. The market movement is also subjected to the third-quarter earning results of companies in the real sector. Overall, Asia Plus estimated that the results would now show a significant increase from the previous quarter, excluding any extra gains. Companies which should show strong earning growth are in the agricultural-food sector, led by MINT (18.5% QoQ) and TUF (10%QoQ), and those in the petrochemical sector led by IVL (23% QoQ).
Market volatility could be heightened, as positive external factors would be overshadowed by negative sentiments from the big floods. Indeed, the market rose sharply last week, which sent the current price-earning ratio to 11.55 times based on the SET Index level at 980 points. Given the volatility, all should stay alert.

Sukit Udomsirikul
Senior Vice President for retail strategy
SCB Securities

The Thai stock market rose last week despite of the flood crisis increasingly spreading into inner city of Bangkok. Last week’s support factors included foreign investors’ short covering with their net selling of more than Bt20 billion since the beginning of October after easing eurozone’s debt crisis and satisfactory US GDP at 2.5 per cent in the third quarter of this year. In the third quarter of this year, most listed companies’ earnings announcement came as expected.
This week, the SET Index is likely to fluctuate due to profit takings after strong rebounds in the previous weeks.
The SET Index is expected to rise to between 9901,030 points with a downside of 960950 points. It is likely to see shift of money from low-risk assets to more-balanced stock markets in the short term. With this, rises of stock markets across the world could slow down. The US dollar could be sold and weaken more than expected at US$1.40 per euro. Ten-year US bonds’ yield rose to 2.4 per cent, higher than market consensus of 2.3 per cent.
The stock markets across the world and crude price increased more than 5 and 7 per cent, respectively.
Asian and Thai stock markets could continue to go up due to their better fundamentals than the US and Europe. However, the Thai stock market is likely to underperform, compared to its peers in Asia due to the flood crisis.
This week, the follow-up issues are progress of euro-zone debt crisis measures, announcement of major US and Chinese economic data, meetings of US Federal Reserve and European Central Bank and third-quarter earnings announcement of listed companies.

Major events in Europe
- G20 meeting on November 34. It is expected that G20 will confirm assistance, especially from China, for the Europe’s debt crisis.
- European Central Bank on November 3. ECB is expected to cut its benchmark rate.
- Eurozone meeting on November 7. Clearer plan for Greece’s debts and increase of EFSF are expected.
- Besides, it is expected to see progress about approval of 8billioneuro sixth tranche of IMF borrowing to Greece.
Other major events
- Announcement of China’s PMI in October. The figure is expected to rise to 51.8 points in October from 51.2 in the previous month.
- On November 1, October’s ISM of the US is estimated to increase to 52.3 points from 51.6 a month earlier.
lFOMC is likely to maintain the fed fund rate with no QE3 in its meeting on November 2.
Risk factor for the Thai stock market is the country’s flood crisis which has been somewhat priced into stock prices. Stocks with direct impact include auto parts, industrial estates and electronics parts. The flood crisis is likely to shed off the country’s economy by 11.5 per cent. If the flood is worse than expected, that will likely hurt the Thai bourse more.
This week’s investment strategy is buy stocks which are short-covering targets for profit-taking and get slight impact from the flood. They include PTTGC, PTTEP and PTT. Those who fear risks should reduce some of investment in their portfolios when the SET Index is above 1,000 points.

Vajiralux Sanglerdsillapachai
Executive director
Trinity Securities

Last week, market surged on EU deal with the support from plan to write down 50% of Greek Sovereign debt. However, on last Friday, The German Constitutional Court halted the use of a special parliamentary committee to decide on changes to the European Financial Stability Facility (EFSF) on behalf of parliament in emergency situations. We recommend to squeeze portfolio and hold more cash next week, we believe the market is in the situation of bear market rally.
Recommend core port to be BBL, KTB, PTT, PTTGC. Based on the target P/BV of SET at 1.8 times, we reach the short term target at 979 points, therefore we recommend take profit some of your port and hold cash about 50. The range of SET level next week should be 950980 points.