Euro zone will continue to cast a shadow on market

The Thai stock market has risen 1.5 per cent month to date, slightly below regional peers’ 1.9 per cent average gain. Foreign investors were net sellers for two consecutive months after buying aggressively in the first four months of this year. But year to date, the Thai market rose 13 per cent to grab second place in Asia, after the Philippines (+16.9 per cent), and outperformed regional peers’ 4-per-cent rise.
In the US, a weakening economic outlook caused the Fed to extend Operation Twist for another six months. It will purchase another $267 billion worth of 6Y-30Y Treasuries in the second half of the year, financed by equivalent sales of shorter-term (less than 3 years) securities (hence the Twist moniker). It will maintain $44.5 billion per month buy/sell rate, bringing total Operation Twist trade to $667 billion since it was introduced on September 11.
The European debt crisis appears to be coming to a head with the real risk of a disorderly Greek exit from the euro zone and a complete break-up of the monetary union.
According to a DBS economist, decisively making it through this phase of the crisis will require nothing short of a willingness to temper austerity demands and genuine progress in the direction of debt mutualisation/a greater fiscal union – a tall order, suggesting things will get much worse before it gets any better.
We believe investors will remain watchful of euro-zone developments, and attempt to stay ahead of a potential “risk-on” rally. But until we reach a capitulation phase in current market conditions, any risk-on rallies will be short-lived.
We recommend investors exercise caution and select stocks with good earnings visibility, visible catalysts, and decent dividend yields. At the top of our Buy list are Bangkok Expressway (BECL), CS Loxinfo (CSL), Quality Houses (QH), Shin Corporation (INTUCH), and Samui Airport Property Fund (SPF).

SURACHAI PRAMUALCHAROENKIT
Executive director
Trinity Securities

The Federal Open Market Committee meeting on June 19-20 disappointed the worldwide equity market following its decision to extend Operation Twist for another six months without a sign of Quantitative Easing 3 implementation. Moreover, the Federal Reserve revised down 2012 GDP growth from 2.4-2.9 per cent in April to 1.9-2.4 per cent.
We expect two launches from the EU Summit on June 28-29: firstly, the European Banking Union, governed by the EU committee that guarantees deposits of as much as