LTF, RMF funds expected to support trade this week

The issue at hand should have been an all-out effort to stem the EU sovereign-debt crisis, thereby heading off the threat of the euro collapsing, but the meeting centred around a fiscal responsibility pact, which doesn’t even address the core issues. The markets weren’t impressed – the 10-year Italian bond yield, which had dropped to below 6 per cent in anticipation of a favourable summit outcome, has since surged back up to almost 6.7 per cent. Though the US dollar is likely to halt its strengthening against the euro and Asian currencies this week, we believe its positive trend has not ended yet as worries about the euro-zone debt crisis persist. Therefore, commodity prices and commodity-related stocks would remain under pressure in the short run.
Back in Thailand, we expect flows of long-term equity fund and retirement mutual fund cash to the Stock Exchange of Thailand to support trade above 1,000 this week. However, it’s also difficult for the market to break the strong resistance of 1,050, as Thai economic data will remain weak until the first quarter of 2012. We recommend a selective-buy strategy. Our top picks are INTUCH, KTB, CPALL, MAKRO and PS.
 
Tisco Securities

Renewed concerns over euro-zone debt induced a fresh round of profit-taking after the SET jumped to a three-month high earlier this month. Over the past few days, Thai stocks have been weighed down by increased risk aversion after the EU summit on December 9 failed to offer a viable solution to the long-running crisis.
With foreign investors turning net sellers again, RTF and LTF managers appear to have slowed |or delayed year-end purchases |of Thai equities, thereby dashing hopes of a “Santa Claus” rally. However, the Thai market con-|tinues to outperform regional |peers, aided by reports that some overseas-based asset-management companies have upgraded their |rating on the SET. Their main |argument is that resilient domestic demand, spurred by post-flood rebuilding, will help offset a slowdown in 2012 exports. Also, the |SET is trading on a 2012 price-earnings ratio of 10 times, the lowest multiple in the region after China and South Korea, according to DB Asia data.
Although the market’s valuation is undemanding, we anticipate a sharp slowdown in earnings-per-share growth from 33 per cent this year to 18 per cent in 2012. Note that we have downgraded our rating on Thai banks to neutral and revised down our earnings estimates to reflect the adverse impact from floods and the worsening outlook for the global economy. Our top picks in the sector are BBL and SCB due to their well-balanced credit risks, defensive balance sheets and large capital bases.
We have also revised down |our profit forecasts and target |prices for energy and petrochemical stocks, but maintain our Buy rating for PTTEG due to its long-term structural growth story and our expectation of a gradual recovery |in olefins spreads in 2012. Other stocks that should be bought on weakness during the current correction are CPF, CPALL, SCC and ADVANC.