Two factors to influence market

Holding stocks at only 40 per cent of investment portfolios is recommended.

At 1,230 points, the SET Index’s price-to-earnings ratio is at 15.1 times and the prospective P/R at year-end at 13.5 times. These figures are higher than the fair value that ASP Research estimates. The earnings yield gap dropped to 3.5 per cent, compared to the average of higher than 5.3 per cent, reflecting that the stock market is relatively expensive.

Another point is the past movement pattern for stock prices in sector rotation without strong fundamental support. Recently, more price movement was found in small- to medium-market caps and some in laggard groups like petrochemicals. However, these rises may not be sustained. 

This week, two issues could influence the stock market. First, real-sector companies will release their first-quarter earnings. However, they may not be outstanding as several industries have started recovering after last year’s floods. We could see less buying for speculation on the release of earnings results than in the past one to two weeks.

Second, external factors focus mainly on the election result in France and this will affect the resolution of the eurozone’s debt crisis. We need to monitor this situation closely, as it will give a direct impact on money and capital markets. This week’s major economic figure is the US initial jobless claims, which will be released on Thursday.

On fund flows, foreign investors have accumulated Thai stocks worth Bt97.7 billion (maximum Bt99 billion) from November 29-May 3. Based on a statistical study in 1995, when foreign investors’ cumulative net buys reach a record, selling will be seen at about 40 per cent of the latest round of net buys. In this round, we may see the selling of stocks worth about Bt40 billion and that could pressure the SET Index down by 6-9 per cent.

We suggest investors to use caution in investing and lower the stock holding in their portfolios to 40 per cent. We recommend “sell” for stocks with no price upside, compared to their fair value. Laggard stocks with upside, most of which are SMEs, are recommended for purchase. 

Our stock picks are PS, RAIMON and AMATA in the property sector, INTUCH in communications, TCAP in banking and STANLY and SAT in automobile. 

 

 

Chaiyaporn Nompitakcharoen

Head of tactical research

Bualuang Securities

 

The SET continues to set new highs given the positive view on earnings momentum. Year-to-date, the Thai market has generated a return of 20 per cent, which has a large margin of 9 per cent in the local currency over the MSCI Asia FE. 

Morgan Stanley is very upbeat on the Thai stock market due to strong domestic consumption growth as well as the re-starting of the fixed investment cycle. The crude oil price should remain cool because demand is slowing down globally, which is a good factor for the Thai economy. The strong recovery of corporate earnings remains intact. 

For our base scenario, we maintain our SET for the year-end at 1,240 points as we are waiting for first-quarter earnings. Near term, profit taking should curb the market upside for this week. Our stock picks are CPF, ROJNA, BIGC, HEMRAJ, INTUCH and DTAC.

 

 

Tisco Securities

 

Based on last Thursday’s close, the SET has risen for seven straight sessions, taking its gain YTD to 21 per cent. Although Thai equities are likely to face near-term profit taking, we expect the market’s upward momentum to remain intact, aided by continued foreign fund inflows and strong first-quarter earnings results. Other market positives are a subdued inflation rate of 2.47 per cent on year in April (versus 3.45 per cent the previous month), rise in the consumer confidence index to 67.5 in April (the fifth consecutive monthly increase), healthy macroeconomic outlook and accommodative monetary conditions.

The seven banks under our coverage reported aggregate net profit of Bt39.45 billion, exceeding our forecasts and Bloomberg consensus by 7 per cent and 9 per cent respectively. Accordingly, we have revised up our sector earnings forecasts for 2012-13 by 3-4 per cent and maintain our overweight rating, with KBANK, SCB and BAY as our top picks. 

SCC is another of our favourite stocks despite the conglomerate reporting relatively weak first-quarter net profit of Bt5.97 billion, up 87 per cent on quarter but down 35 per cent on year. However, we believe this should mark SCC’s worst quarter of 2012, as petrochem spreads have started to recover while the company has already resumed operations at some flood-damaged plants.

In the retail sector, we have upgraded our 2012-13 earnings forecasts and target prices for HMPRO and ROBINS to reflect their more ambitious expansion programmes in the provinces and the faster-than-expected recovery in domestic demand. HMPRO offers limited upside to our new target price but we remain positive on ROBINS due to its plan to open five department stores a year in upcountry areas over the next five years. Elsewhere we advise investors to accumulate mid-cap stocks benefiting from the recovery in domestic demand such as MINT, MAJOR and HEMRAJ.