Market to go up this week

The Thai stock market continued to rise, inching up 2 per cent month to date, beating regional peers by a hair’s breadth. Foreign investors were heavy net buyers in the market, while local retail investors and local institutional investors remained net sellers. Year to date, the market gained 16 per cent, in line with regional peers.
DBS Vickers’ regional strategist has upgraded Thailand to overweight for the second quarter, after raising it to neutral last quarter. The country has recovered faster and stronger than expected since the floods, with the fourth quarter of last year having seen the worst of the floods. The Thai economy has been in a Vshaped recovery since December, with the manufacturing sector recouping 70 per cent of output lost in October-November. We currently expect the Thai economy to grow 5.5 per cent in 2012 and 2013, ahead of recent trends and consensus expectations. Government spending as well as policy initiatives to boost domestic consumption and investments should help to offset possibly weaker growth in exports.
And much like economic growth, 2012 and 2013 inflation rates are also set to average the above-trend rate of 3.8 per cent. But given the current government’s and central bank’s greater tolerance for inflation, we do not expect rate hikes this year.
In terms of corporate earnings, we expect companies in our coverage to report strong 18percent earnings growth this year and the next – among the highest in the region. Growth would be partly boosted by:
- Resumption of operations in various industries that suffered from heavy flooding last year;
- Demand recovery post-flood, and
- Cut in corporate income tax from 30 per cent to 23 per cent in 2012 and to 20 per cent in 2013.
We still prefer domestic demand plays in banks, commerce, property, food and telecom sectors. Our current top picks are Amata Corporation (AMATA), Bangkok Bank (BBL), Central Pattana (CPN), Siam Global House (GLOBAL), and Siam Future Development (SF).

Sukit Udomsirikul
Senior vice president for retail strategy
SCB Securities

We expect the SET Index will go up this week but the market theme may be rotated to cyclical and commodity stocks rather than domestic play as stocks under domestic play theme such as commerce and banking sectors have already had strong rallies last week.
The positive US economic data is the key support that can cool down investors’ concerns of a slowdown in China’s economy while we are waiting for a new round of China’s easing of monetary policy. Foreign investors are still expected to be net buyers this week in response to falling systemic risks. This week is quite a busy week in terms of events, both domestic and external. Domestically, the central bank’s Monetary Policy Committee will hold its meeting on March 21.
We expect the Bank of Thailand to maintain the policy rate at 3 per cent as the central bank will have a more positive view on Thailand’s economic growth in 2012.
On the same day, the NBTC board is expected to approve the telecom draft. This will be a positive sentiment for ICT stocks. Externally, Greece’s debt is due on March 20. The troika has already given approval for a new bailout package for Greece. We don’t see any risk on this issue. In terms of economic data, the US home sales is the key data to be watched because the property sector is the weakest part of the US economy. If the figure is good, it will be positive for market sentiment as a whole. This week, we recommend buying ICT stocks such as DTAC and also commodity stocks such as TOP and PTTGC.

Vajiralux Sanglerdsillapachai
Executive director
Trinity Securities

We advise investors to consider which stocks are really on “the mega-trend”. For instance, economic signals from China might create some negative trends for commodity stocks.
 It is a wise idea to avoid the petrochemical and consumer sectors. Though, we acknowledge that the issue of increasing LPG or gasohol price really did not have much of an impact on the stocks’ fundamental. For further investment, it is better to consider the mega-trend today – for example, smart-phone sales are boosting the ICT sector; satellite TV in the broadband business could be the next trend. So, you have to consider whether MCOT will lose its benefit, or RS, GRAMMY, and WORK will gain from it. We recommend trading buys for JAS and TRUE.