Thai Stocks

[Taggart]

The Nation

Thu, May 24, 2007 : Last updated 20:43 pm (Thai local time)

Thai share prices closed 1.44 per cent lower Thursday after former Federal Reserve chairman Alan Greenspan reportedly warned of a possible "dramatic contraction" in Chinese stocks, dealers said.

They said selling spread across the board as investors also turned jittery ahead of next week's court ruling on Thailand's two major political parties.

The Stock Exchange of Thailand (SET) composite index dropped 10.50 points, the largest fall since early January, to 720.72 while the blue-chip SET 50 index lost 7.76 to 509.67.

When the stock market closed for morning trading session, it plunged 1.6 per cent at one point during Thursday morning trading session to 719.56 from Wednesday which closed at 731.22 on mounting anxiety over political uncertainty in Thailand as well as regional stock slump.

The SET index, however, slightly recovered to end the first trading session at 721.51, down by 1.33 per cent.

Brokers said the sharp decline in the Thai stocks could be ascribed to investor fears over rising political uncertain toward court ruling on whether two key political parties would be dissolved scheduled on May 30. In addition, the SET index fall was also caused by regional stock market plunge led by Chinese stock markets after former US Federal Reserve chairman Alan Greenspan commented that China's stock markets are already overheat.

Agence France Presse/The Nation

[Mid]

hey wooo back ,

where's them guys who were using the SET just the day before yesterday to prove all is hunky dorie ..........................

[ray23]

Thing are not looking real good for the Constitution either, the high courts are opposing many parts of it. The committee working on it were supposed to have a meeting with the King tonight on that was supposed to be televised, anyone catch that?

These things have to a effect investor confidence

[samran]

I'm buying....

[Taggart]

I'm buying....

I'm wondering if John Templeton would be a buyer now. The following interview is what he said in 1998, shortly after the Asian crisis, regarding Thai companies. Perhaps things have changed regarding the company debt levels since then?

----------------------------------------

Sir JOHN TEMPLETON: I've never favored pessimism, Adam. What I favored is searching for the shares that are most thoroughly depressed. When people are desperately trying to sell, I buy. When people are desperately trying to buy, I sell. It has worked out very well over the years.

Now where are people desperately trying to sell? It's mainly in Asia now. There are more than 10 markets in the world that are now 60 percent below that peak already.

ADAM SMITH: So that means you're attracted by Asia.

Sir JOHN TEMPLETON: In December, I thought Korea had more bargains, lower prices than anywhere else because of the tremendous pessimism. So I did buy various stocks, various mutual funds that specialize in Korea. But on the other hand, I have not bought in some of the very depressed markets like Indonesia and Thailand because there the corporations have such enormous debts that we're only fooling ourselves to think that the shareholders own the company. The shareholders- the companies are really owned by the bondholders.

[samran]

debt story is totally different today. In 1997 people were caught when the baht tanked, doubling (in baht terms) the amount of debt they held in USD. Many companies have spent the past 10 years rebuilding, and there are some clever people doing clever things these days...but doing so more soberly.

[Taggart]

debt story is totally different today. In 1997 people were caught when the baht tanked, doubling (in baht terms) the amount of debt they held in USD. Many companies have spent the past 10 years rebuilding, and there are some clever people doing clever things these days...but doing so more soberly.

There are no Thai stocks listed on the "major" exchanges (I like some liquidity) here in North America, so for that reason I won't be buying (except for what I own in an emerging markets fund).

Thailand is now probably the cheapest stock market in Asia. So, if the Thai companies are in better shape (at least regarding debt to equity), is it only the political uncertainties investors are looking at now?

Edited May 24, 2007 by Taggart

[steveromagnino]

debt story is totally different today. In 1997 people were caught when the baht tanked, doubling (in baht terms) the amount of debt they held in USD. Many companies have spent the past 10 years rebuilding, and there are some clever people doing clever things these days...but doing so more soberly.

There are no Thai stocks listed on the "major" exchanges (I like some liquidity) here in North America, so for that reason I won't be buying (except for what I own in an emerging markets fund).

Thailand is now probably the cheapest stock market in Asia. So, if the Thai companies are in better shape (at least regarding debt to equity), is it only the political uncertainties investors are looking at now?

Thailand has been a classic under performer overall the last few years, but investors still worry about:

- small floats with inability to enjoy takeovers and consolidation in many cases

- lack of liquidity

- some concerns with insider trading and lack of transparency plus political maniupation (particularly during the Thaksin years, good if you liked AIS and could follow the Picnic/PTT type deals fast enough, bad if you liked Democrat type companies or any telcos that didn't say Shin)

- exposure to a single market in some cases

- difficulty in getting information for non blue chips as it is in Thai and not often covered by analysts

- Thai baht exchange rate

- the dual board foreigners 49% cap thing

- the actual companies themselves - some odd ones in the mix

Some stocks are interesting and I think it is almost always a time to buy in any market if you look hard enough; I like companies like PSL and RCL as in their business operations they aren't exposed to the local market, but you get the benefit of the lower P/E ratios. You have companies like Tricon building turnkey factories. Property developers like AP. But mighty hard to invest in any of these if there aren't analysts covering them, so foreigners end up stuck with PTT, BBL and so forth.

Not that i would have complained buying PTT at sub 50b in the float :-)

[RusT]

debt story is totally different today. In 1997 people were caught when the baht tanked, doubling (in baht terms) the amount of debt they held in USD. Many companies have spent the past 10 years rebuilding, and there are some clever people doing clever things these days...but doing so more soberly.

There are no Thai stocks listed on the "major" exchanges (I like some liquidity) here in North America, so for that reason I won't be buying (except for what I own in an emerging markets fund).

Thailand is now probably the cheapest stock market in Asia. So, if the Thai companies are in better shape (at least regarding debt to equity), is it only the political uncertainties investors are looking at now?

Thailand has been a classic under performer overall the last few years, but investors still worry about:

- small floats with inability to enjoy takeovers and consolidation in many cases

- lack of liquidity

- some concerns with insider trading and lack of transparency plus political maniupation (particularly during the Thaksin years, good if you liked AIS and could follow the Picnic/PTT type deals fast enough, bad if you liked Democrat type companies or any telcos that didn't say Shin)

- exposure to a single market in some cases

- difficulty in getting information for non blue chips as it is in Thai and not often covered by analysts

- Thai baht exchange rate

- the dual board foreigners 49% cap thing

- the actual companies themselves - some odd ones in the mix

Some stocks are interesting and I think it is almost always a time to buy in any market if you look hard enough; I like companies like PSL and RCL as in their business operations they aren't exposed to the local market, but you get the benefit of the lower P/E ratios. You have companies like Tricon building turnkey factories. Property developers like AP. But mighty hard to invest in any of these if there aren't analysts covering them, so foreigners end up stuck with PTT, BBL and so forth.

Not that i would have complained buying PTT at sub 50b in the float :-)

I have no problem finding English analysis and recommendations on most companies trading on the SET (both large and smaller caps) through brokerage websites (some of them you don't have to be a member ie. www.kimeng.co.th) but as I said on a recent post, I would prefer to have a bit more detailed fundamental and technical analysis than I've been able to find so far.

I agree with above that liquidity can be a problem with smaller caps and for that reason I mainly (but not always) try to stay away from them. It seems to me that when the big overseas funds come in to invest (and this is what seems to really move the market) they mostly stick to 5 or so large market cap stocks anyway.

Just my two bahts worth...

[Arkady]

I'm buying....

I'm wondering if John Templeton would be a buyer now. The following interview is what he said in 1998, shortly after the Asian crisis, regarding Thai companies. Perhaps things have changed regarding the company debt levels since then?

----------------------------------------

Sir JOHN TEMPLETON: I've never favored pessimism, Adam. What I favored is searching for the shares that are most thoroughly depressed. When people are desperately trying to sell, I buy. When people are desperately trying to buy, I sell. It has worked out very well over the years.

Now where are people desperately trying to sell? It's mainly in Asia now. There are more than 10 markets in the world that are now 60 percent below that peak already.

ADAM SMITH: So that means you're attracted by Asia.

Sir JOHN TEMPLETON: In December, I thought Korea had more bargains, lower prices than anywhere else because of the tremendous pessimism. So I did buy various stocks, various mutual funds that specialize in Korea. But on the other hand, I have not bought in some of the very depressed markets like Indonesia and Thailand because there the corporations have such enormous debts that we're only fooling ourselves to think that the shareholders own the company. The shareholders- the companies are really owned by the bondholders.

After making this statement Templeton got totally creamed in the suckers' rally in the Thai market in 1999, probably in Korea and other markets too. That is not to disparage him but just shows that you have to have balls for this strategy and stick to it over time as it is doesn't work every time. Sir John's earlier maxim was "Buy when there's blood on the streets". He is over 90 and has now sold Templetons but continues as an active investor of his own substantial wealth.

[Arkady]

debt story is totally different today. In 1997 people were caught when the baht tanked, doubling (in baht terms) the amount of debt they held in USD. Many companies have spent the past 10 years rebuilding, and there are some clever people doing clever things these days...but doing so more soberly.

There are no Thai stocks listed on the "major" exchanges (I like some liquidity) here in North America, so for that reason I won't be buying (except for what I own in an emerging markets fund).

Thailand is now probably the cheapest stock market in Asia. So, if the Thai companies are in better shape (at least regarding debt to equity), is it only the political uncertainties investors are looking at now?

You can also buy the Thai Fund Inc listed in New York as TTF.

[Taggart]

Are there companies listed on the SET that have been increasing their dividends over the last few years, faster than the Thai inflation rate?

[Taggart]

Thai stocks rally, baht steady after Thaksin shock

By Viparat Jantraprap

Fri Jun 1, 2007 7:06am ET

BANGKOK, June 1 (Reuters) - Thailand's markets breathed a sigh of relief on Friday after the shock banishment of former Prime Minister Thaksin Shinawatra and his party did not trigger violence.

The stock market <.SETI>, closed on Thursday for a holiday, defied analyst predictions of a drop to rise 2.24 percent, while bonds were flat and the baht currency <THB=TH> held steady near a 9-1/2-year high.

Foreign investors bought shares worth a net 8.1 billion baht ($235 million), their biggest net daily buying since April 2006.

Investors cited a poor turnout for a protest some feared might turn violent and rising hopes a general election promised by the military-installed government would be held on time in December.

"What's better for the market is that there's a certainty the election is going to come through," said Ronald Chan of Fortis Investments in Hong Kong, who oversees about $1.5 billion, including investments in Thailand.

"But the quality of the aftermath? We're not quite sure, so at this stage we are still underweight on Thailand."

FLASH POINTS

Indeed, there were still doubts the elections would be held on time and nobody was betting on an end to a political crisis that started early last year.

There are plenty of flash points coming up.

Thaksin's Thai Rak Thai (Thais Love Thais) party is furious about being disbanded and having 111 leaders banned from politics for five years for election fraud, while the tribunal absolved the opposition Democrat Party of all charges against it.

"I do not expect a strong rally given there's still a risk of street protests," DBS Vickers Securities analyst Arpaporn Sawaengpak said.

Thaksin is also likely to face charges of corruption, one of the reasons the military gave for the coup, and trials could spur more protests and possible violence.

The banned leaders of Thai Rak Thai, which will reappear under a new name once the generals allow political activities to resume, will be pulling the strings from behind the scenes, analysts say.

Some saw upside in the verdicts.

"Purely from the market's perspective, the sparing of the Democrat Party from charges of electoral fraud has reduced the risks that the next elected government would be made up of inexperienced politicians from a coalition of small parties", UBS analysts said in a note to clients.

CHEAP STOCKS

Energy stocks, seen as defensive plays, led Friday's rise, with Thai Oil (TOP.BK: Quote, Profile , Research), Thailand's biggest refiner, up 2.2 percent and PTT Exploration and Production (PTTE.BK: Quote, Profile , Research), up 1.9 percent at 106 baht.

Banks and property, seen as beneficiaries of any economic recovery, also got a boost, with Bangkok Bank (BBL.BK: Quote, Profile , Research), the biggest, up 2.6 percent and Land & Houses (LH.BK: Quote, Profile , Research), the leading housing firm, up 2.2 percent.

Politically related shares recovered from early falls, with housing firm SC Asset Corporation (SC.BK: Quote, Profile , Research), majority owned by Thaksin's family, rose 3.6 percent and M-Link Asia (MLIN.BK: Quote, Profile , Research), founded by his sisters, was unchanged.

The political uncertainty has made Thai stocks cheap: The stock market, valued at $165 billion, smaller than Toyota Motor's (7203.T: Quote, NEWS , Research) $216 billion, trades at 9.6 times earnings, the cheapest in Asia after Jakarta's <.JKSE> 8.6 times.

The baht was quoted at 34.59/63 per dollar in onshore trade. The currency has powered ahead on the back of Thailand's trade surplus, making it Asia's third best performing currency this year with a 4-½ percent rise.

Many analysts, though, expect the surplus to turn into a deficit soon on slowing exports. And Thailand's political situation is still a mess, HSBC strategist Richard Yetsenga said.

Most Thais have been looking elsewhere to invest their money as economic growth slowed and consumer confidence dipped under the weight of political worries despite a steady fall in inflation.

Many have gone into the bond market <0#THTSY=>, where yields were largely flat to lower in thin Friday trade. The bond market is more concerned about interest rates after the Bank of Thailand cut rates four times this year to 3.5 percent to stimulate the flagging economy, dealers said. ($1 = 34.60 Baht) (Additional reporting by Arada Therdthammakun and Ian Chua and Jeffrey Hodgson in Hong Kong)

© Reuters 2007. All Rights Reserved.

Edited June 1, 2007 by Taggart

[Taggart]

EMERGING MARKETS REPORT

UBS urges caution on Thai stocks, points to risks

By Polya Lesova, MarketWatch

Last Update: 12:34 PM ET Jun 5, 2007

NEW YORK (MarketWatch) -- Thailand's stock market rally is limited mostly to sectors with strong earnings, while the outflow of foreign capital and political uncertainty remain key risks, a UBS analyst says.

Thailand's benchmark SET index rose 2.2% Monday to a new high of 770.61 points, boosted by news of better-than-expected GDP growth in the first quarter. However, traders locked in gains Tuesday, pushing the index down 1.3% at 760.59 points.

The SET index has gained 12% this year, but that surge hasn't been accompanied by a recovery in domestic demand.

"While we remain cautious on the top-down outlook for the [Thai] market, we can't ignore that the equity markets globally remain bullish, and there are likely to be benefits accruing to the Thai market as well," said Keith Neruda, analyst at UBS Investment Research, in a note to clients Tuesday.

"However, we do believe that it makes sense to focus on stocks that are showing quantifiable evidence of upside earnings risk today," he said. "These stocks include those in the energy and telecoms sectors, for both of which we have an overweight recommendation."

Neruda points to several reasons for exercising caution when investing in Thai stocks.

First, the energy and petrochemical sectors have contributed to more than 50% of the SET's gains this quarter, which is more than their current index weight of 34%. The telecommunications sector has also performed very well, adding 15% to the SET's gains, even as it has only an 8% weight in the index.

Banks have underperformed, contributing only 9% of index gains, while their index weight is 16%.

"Market leadership has shifted from banks to the energy sector," Neruda said. "Don't confuse an energy sector rally with a broad market re-rating."

Another reason for caution is that there's a "quite strong" correlation between foreign buying of Thai stocks and short-term index performance. Foreigners have bought $1.5 billion worth of Thai equities this quarter, just as the SET has surged 12%.

In comparison, since the start of last year, foreigners have acquired a net $4.6 billion worth of Thai stocks, though the market has gained only 6.2%. That's not a big increase given that the net buy position accounts for nearly 3% of the index's total market capitalization, Neruda said.

"The problem is that local buying support is so weak that it takes far less foreign selling to de-rate the market than it takes foreign buying to re-rate it," he said. "Strong buying interest today may not be enough to sustain the Thai market over the next six to 12 months unless local buying interest recovers."

Brad Durham, managing director of EPFR Global from Emerging Portfolio Fund Research, said that an improvement in sentiment can be seen in the data, which shows net buying and selling by country of about 1,000 equity funds with $860 billion in total assets.

"I wouldn't say that fund managers are buying aggressively like they have been with Malaysian equities over the past six months," Durham said.

"What has happened is that the consistent selling from November 2006 through February 2007 has ended, and funds were net buyers of Thai equities in March 2007 and were even in their buying-selling in April."

Thailand appears to be comparing well against other emerging markets around the world, but on a regional basis other markets "are getting the attention of Asia regional fund managers," he said.

Investors in Thailand have had a bumpy ride this year. In a confidence-destroying move, Thailand's central bank introduced restrictions on foreign investments in late December, triggering a hemorrhage in Thailand's equity markets, with Bangkok's benchmark SET index tumbling 15% in one session. Capital controls have since been scrapped, but confidence is far from restored. Read more.

Political uncertainty continues

Political and legal uncertainty has also been clouding the outlook for Thai stocks since last September when the military seized power in a coup and ousted then Prime Minister Thaksin Shinawatra.

The coup leaders introduced a temporary constitution that empowers them to appoint and fire the government and the acting parliament. It's generally expected that Thailand will have a draft constitution by the end of the first half of the year, followed by a referendum to approve it in the third quarter of the year, and elections by the fourth quarter.

Last week, an ad hoc constitutional tribunal ruled to dissolve the former ruling Thai Rak Thai party, which was founded by Thaksin, and ban all 111 of its executives from holding political office for five years.

"While it may be tempting to believe that the market's strong rally is signaling that political risk has declined, we are not convinced," Neruda said.

The tribunal's ruling raises the risk that the next general election will be considered illegitimate by a large group of voters, especially in the north and northeast of the country where the Thai Rak Thai party was very popular, he said.

Analysts at Action Economics said: "Sluggishness in domestic demand on the depressed consumer and business confidence admit continued political turmoil remains a drag on growth."

First-quarter GDP rose by 1.2% quarter-on-quarter to 4.3% year-on-year, beating expectations and matching growth in the fourth quarter of last year.

"The cumulative 150 basis points policy rate cut since January and forthcoming fiscal bias to spend aggressively should provide a lift to the domestic economy and markets in second half of 2007 when exports may switch to low gear," said Jun Trinidad, analyst at Citigroup Global Markets, in a research note. Read more about rate cuts.

"For as long as political drift remains unresolved, the long-term private spending component of GDP should fall short of potential," Trinidad said. End of Story

Polya Lesova is a MarketWatch reporter based in New York.

[RusT]

EMERGING MARKETS REPORT

UBS urges caution on Thai stocks, points to risks

By Polya Lesova, MarketWatch

Last Update: 12:34 PM ET Jun 5, 2007

NEW YORK (MarketWatch) -- Thailand's stock market rally is limited mostly to sectors with strong earnings, while the outflow of foreign capital and political uncertainty remain key risks, a UBS analyst says.

Thailand's benchmark SET index rose 2.2% Monday to a new high of 770.61 points, boosted by news of better-than-expected GDP growth in the first quarter. However, traders locked in gains Tuesday, pushing the index down 1.3% at 760.59 points.

The SET index has gained 12% this year, but that surge hasn't been accompanied by a recovery in domestic demand.

"While we remain cautious on the top-down outlook for the [Thai] market, we can't ignore that the equity markets globally remain bullish, and there are likely to be benefits accruing to the Thai market as well," said Keith Neruda, analyst at UBS Investment Research, in a note to clients Tuesday.

"However, we do believe that it makes sense to focus on stocks that are showing quantifiable evidence of upside earnings risk today," he said. "These stocks include those in the energy and telecoms sectors, for both of which we have an overweight recommendation."

Neruda points to several reasons for exercising caution when investing in Thai stocks.

First, the energy and petrochemical sectors have contributed to more than 50% of the SET's gains this quarter, which is more than their current index weight of 34%. The telecommunications sector has also performed very well, adding 15% to the SET's gains, even as it has only an 8% weight in the index.

Banks have underperformed, contributing only 9% of index gains, while their index weight is 16%.

"Market leadership has shifted from banks to the energy sector," Neruda said. "Don't confuse an energy sector rally with a broad market re-rating."

Another reason for caution is that there's a "quite strong" correlation between foreign buying of Thai stocks and short-term index performance. Foreigners have bought $1.5 billion worth of Thai equities this quarter, just as the SET has surged 12%.

In comparison, since the start of last year, foreigners have acquired a net $4.6 billion worth of Thai stocks, though the market has gained only 6.2%. That's not a big increase given that the net buy position accounts for nearly 3% of the index's total market capitalization, Neruda said.

"The problem is that local buying support is so weak that it takes far less foreign selling to de-rate the market than it takes foreign buying to re-rate it," he said. "Strong buying interest today may not be enough to sustain the Thai market over the next six to 12 months unless local buying interest recovers."

Brad Durham, managing director of EPFR Global from Emerging Portfolio Fund Research, said that an improvement in sentiment can be seen in the data, which shows net buying and selling by country of about 1,000 equity funds with $860 billion in total assets.

"I wouldn't say that fund managers are buying aggressively like they have been with Malaysian equities over the past six months," Durham said.

"What has happened is that the consistent selling from November 2006 through February 2007 has ended, and funds were net buyers of Thai equities in March 2007 and were even in their buying-selling in April."

Thailand appears to be comparing well against other emerging markets around the world, but on a regional basis other markets "are getting the attention of Asia regional fund managers," he said.

Investors in Thailand have had a bumpy ride this year. In a confidence-destroying move, Thailand's central bank introduced restrictions on foreign investments in late December, triggering a hemorrhage in Thailand's equity markets, with Bangkok's benchmark SET index tumbling 15% in one session. Capital controls have since been scrapped, but confidence is far from restored. Read more.

Political uncertainty continues

Political and legal uncertainty has also been clouding the outlook for Thai stocks since last September when the military seized power in a coup and ousted then Prime Minister Thaksin Shinawatra.

The coup leaders introduced a temporary constitution that empowers them to appoint and fire the government and the acting parliament. It's generally expected that Thailand will have a draft constitution by the end of the first half of the year, followed by a referendum to approve it in the third quarter of the year, and elections by the fourth quarter.

Last week, an ad hoc constitutional tribunal ruled to dissolve the former ruling Thai Rak Thai party, which was founded by Thaksin, and ban all 111 of its executives from holding political office for five years.

"While it may be tempting to believe that the market's strong rally is signaling that political risk has declined, we are not convinced," Neruda said.

The tribunal's ruling raises the risk that the next general election will be considered illegitimate by a large group of voters, especially in the north and northeast of the country where the Thai Rak Thai party was very popular, he said.

Analysts at Action Economics said: "Sluggishness in domestic demand on the depressed consumer and business confidence admit continued political turmoil remains a drag on growth."

First-quarter GDP rose by 1.2% quarter-on-quarter to 4.3% year-on-year, beating expectations and matching growth in the fourth quarter of last year.

"The cumulative 150 basis points policy rate cut since January and forthcoming fiscal bias to spend aggressively should provide a lift to the domestic economy and markets in second half of 2007 when exports may switch to low gear," said Jun Trinidad, analyst at Citigroup Global Markets, in a research note. Read more about rate cuts.

"For as long as political drift remains unresolved, the long-term private spending component of GDP should fall short of potential," Trinidad said. End of Story

Polya Lesova is a MarketWatch reporter based in New York.

Good article. Do you have the original link to this story? Thanks

[RusT]

Are there companies listed on the SET that have been increasing their dividends over the last few years, faster than the Thai inflation rate?

Plenty of stocks will pay a dividend of 5% plus with even some of them paying 10% plus. Usually the high paying dividend stocks are small cap and can be somewhat risky. There are a few blue chips paying around 5% though. Not sure what the current inflation rate is but from what I understand it is fairly low right now.

[Taggart]

EMERGING MARKETS REPORT

UBS urges caution on Thai stocks, points to risks

By Polya Lesova, MarketWatch

Last Update: 12:34 PM ET Jun 5, 2007

NEW YORK (MarketWatch) -- Thailand's stock market rally is limited mostly to sectors with strong earnings, while the outflow of foreign capital and political uncertainty remain key risks, a UBS analyst says.

Thailand's benchmark SET index rose 2.2% Monday to a new high of 770.61 points, boosted by news of better-than-expected GDP growth in the first quarter. However, traders locked in gains Tuesday, pushing the index down 1.3% at 760.59 points.

The SET index has gained 12% this year, but that surge hasn't been accompanied by a recovery in domestic demand.

"While we remain cautious on the top-down outlook for the [Thai] market, we can't ignore that the equity markets globally remain bullish, and there are likely to be benefits accruing to the Thai market as well," said Keith Neruda, analyst at UBS Investment Research, in a note to clients Tuesday.

"However, we do believe that it makes sense to focus on stocks that are showing quantifiable evidence of upside earnings risk today," he said. "These stocks include those in the energy and telecoms sectors, for both of which we have an overweight recommendation."

Neruda points to several reasons for exercising caution when investing in Thai stocks.

First, the energy and petrochemical sectors have contributed to more than 50% of the SET's gains this quarter, which is more than their current index weight of 34%. The telecommunications sector has also performed very well, adding 15% to the SET's gains, even as it has only an 8% weight in the index.

Banks have underperformed, contributing only 9% of index gains, while their index weight is 16%.

"Market leadership has shifted from banks to the energy sector," Neruda said. "Don't confuse an energy sector rally with a broad market re-rating."

Another reason for caution is that there's a "quite strong" correlation between foreign buying of Thai stocks and short-term index performance. Foreigners have bought $1.5 billion worth of Thai equities this quarter, just as the SET has surged 12%.

In comparison, since the start of last year, foreigners have acquired a net $4.6 billion worth of Thai stocks, though the market has gained only 6.2%. That's not a big increase given that the net buy position accounts for nearly 3% of the index's total market capitalization, Neruda said.

"The problem is that local buying support is so weak that it takes far less foreign selling to de-rate the market than it takes foreign buying to re-rate it," he said. "Strong buying interest today may not be enough to sustain the Thai market over the next six to 12 months unless local buying interest recovers."

Brad Durham, managing director of EPFR Global from Emerging Portfolio Fund Research, said that an improvement in sentiment can be seen in the data, which shows net buying and selling by country of about 1,000 equity funds with $860 billion in total assets.

"I wouldn't say that fund managers are buying aggressively like they have been with Malaysian equities over the past six months," Durham said.

"What has happened is that the consistent selling from November 2006 through February 2007 has ended, and funds were net buyers of Thai equities in March 2007 and were even in their buying-selling in April."

Thailand appears to be comparing well against other emerging markets around the world, but on a regional basis other markets "are getting the attention of Asia regional fund managers," he said.

Investors in Thailand have had a bumpy ride this year. In a confidence-destroying move, Thailand's central bank introduced restrictions on foreign investments in late December, triggering a hemorrhage in Thailand's equity markets, with Bangkok's benchmark SET index tumbling 15% in one session. Capital controls have since been scrapped, but confidence is far from restored. Read more.

Political uncertainty continues

Political and legal uncertainty has also been clouding the outlook for Thai stocks since last September when the military seized power in a coup and ousted then Prime Minister Thaksin Shinawatra.

The coup leaders introduced a temporary constitution that empowers them to appoint and fire the government and the acting parliament. It's generally expected that Thailand will have a draft constitution by the end of the first half of the year, followed by a referendum to approve it in the third quarter of the year, and elections by the fourth quarter.

Last week, an ad hoc constitutional tribunal ruled to dissolve the former ruling Thai Rak Thai party, which was founded by Thaksin, and ban all 111 of its executives from holding political office for five years.

"While it may be tempting to believe that the market's strong rally is signaling that political risk has declined, we are not convinced," Neruda said.

The tribunal's ruling raises the risk that the next general election will be considered illegitimate by a large group of voters, especially in the north and northeast of the country where the Thai Rak Thai party was very popular, he said.

Analysts at Action Economics said: "Sluggishness in domestic demand on the depressed consumer and business confidence admit continued political turmoil remains a drag on growth."

First-quarter GDP rose by 1.2% quarter-on-quarter to 4.3% year-on-year, beating expectations and matching growth in the fourth quarter of last year.

"The cumulative 150 basis points policy rate cut since January and forthcoming fiscal bias to spend aggressively should provide a lift to the domestic economy and markets in second half of 2007 when exports may switch to low gear," said Jun Trinidad, analyst at Citigroup Global Markets, in a research note. Read more about rate cuts.

"For as long as political drift remains unresolved, the long-term private spending component of GDP should fall short of potential," Trinidad said. End of Story

Polya Lesova is a MarketWatch reporter based in New York.

Good article. Do you have the original link to this story? Thanks

As far as I know the rules of the forum state , words to the effect, that I can't post links that contain any advertising whatsoever. One of the moderators can set me straight if I'm wrong on this. I believe that if you ask me to, I can PM the link.

As far as the dividends on Thai stocks, I knew that some of them had high yields, but was also seeking to find out if any of the companies have actually been increasing their dividends each year for the last few years. I don't want a list, just curious if there are any.

[RusT]

EMERGING MARKETS REPORT

UBS urges caution on Thai stocks, points to risks

By Polya Lesova, MarketWatch

Last Update: 12:34 PM ET Jun 5, 2007

NEW YORK (MarketWatch) -- Thailand's stock market rally is limited mostly to sectors with strong earnings, while the outflow of foreign capital and political uncertainty remain key risks, a UBS analyst says.

Thailand's benchmark SET index rose 2.2% Monday to a new high of 770.61 points, boosted by news of better-than-expected GDP growth in the first quarter. However, traders locked in gains Tuesday, pushing the index down 1.3% at 760.59 points.

The SET index has gained 12% this year, but that surge hasn't been accompanied by a recovery in domestic demand.

"While we remain cautious on the top-down outlook for the [Thai] market, we can't ignore that the equity markets globally remain bullish, and there are likely to be benefits accruing to the Thai market as well," said Keith Neruda, analyst at UBS Investment Research, in a note to clients Tuesday.

"However, we do believe that it makes sense to focus on stocks that are showing quantifiable evidence of upside earnings risk today," he said. "These stocks include those in the energy and telecoms sectors, for both of which we have an overweight recommendation."

Neruda points to several reasons for exercising caution when investing in Thai stocks.

First, the energy and petrochemical sectors have contributed to more than 50% of the SET's gains this quarter, which is more than their current index weight of 34%. The telecommunications sector has also performed very well, adding 15% to the SET's gains, even as it has only an 8% weight in the index.

Banks have underperformed, contributing only 9% of index gains, while their index weight is 16%.

"Market leadership has shifted from banks to the energy sector," Neruda said. "Don't confuse an energy sector rally with a broad market re-rating."

Another reason for caution is that there's a "quite strong" correlation between foreign buying of Thai stocks and short-term index performance. Foreigners have bought $1.5 billion worth of Thai equities this quarter, just as the SET has surged 12%.

In comparison, since the start of last year, foreigners have acquired a net $4.6 billion worth of Thai stocks, though the market has gained only 6.2%. That's not a big increase given that the net buy position accounts for nearly 3% of the index's total market capitalization, Neruda said.

"The problem is that local buying support is so weak that it takes far less foreign selling to de-rate the market than it takes foreign buying to re-rate it," he said. "Strong buying interest today may not be enough to sustain the Thai market over the next six to 12 months unless local buying interest recovers."

Brad Durham, managing director of EPFR Global from Emerging Portfolio Fund Research, said that an improvement in sentiment can be seen in the data, which shows net buying and selling by country of about 1,000 equity funds with $860 billion in total assets.

"I wouldn't say that fund managers are buying aggressively like they have been with Malaysian equities over the past six months," Durham said.

"What has happened is that the consistent selling from November 2006 through February 2007 has ended, and funds were net buyers of Thai equities in March 2007 and were even in their buying-selling in April."

Thailand appears to be comparing well against other emerging markets around the world, but on a regional basis other markets "are getting the attention of Asia regional fund managers," he said.

Investors in Thailand have had a bumpy ride this year. In a confidence-destroying move, Thailand's central bank introduced restrictions on foreign investments in late December, triggering a hemorrhage in Thailand's equity markets, with Bangkok's benchmark SET index tumbling 15% in one session. Capital controls have since been scrapped, but confidence is far from restored. Read more.

Political uncertainty continues

Political and legal uncertainty has also been clouding the outlook for Thai stocks since last September when the military seized power in a coup and ousted then Prime Minister Thaksin Shinawatra.

The coup leaders introduced a temporary constitution that empowers them to appoint and fire the government and the acting parliament. It's generally expected that Thailand will have a draft constitution by the end of the first half of the year, followed by a referendum to approve it in the third quarter of the year, and elections by the fourth quarter.

Last week, an ad hoc constitutional tribunal ruled to dissolve the former ruling Thai Rak Thai party, which was founded by Thaksin, and ban all 111 of its executives from holding political office for five years.

"While it may be tempting to believe that the market's strong rally is signaling that political risk has declined, we are not convinced," Neruda said.

The tribunal's ruling raises the risk that the next general election will be considered illegitimate by a large group of voters, especially in the north and northeast of the country where the Thai Rak Thai party was very popular, he said.

Analysts at Action Economics said: "Sluggishness in domestic demand on the depressed consumer and business confidence admit continued political turmoil remains a drag on growth."

First-quarter GDP rose by 1.2% quarter-on-quarter to 4.3% year-on-year, beating expectations and matching growth in the fourth quarter of last year.

"The cumulative 150 basis points policy rate cut since January and forthcoming fiscal bias to spend aggressively should provide a lift to the domestic economy and markets in second half of 2007 when exports may switch to low gear," said Jun Trinidad, analyst at Citigroup Global Markets, in a research note. Read more about rate cuts.

"For as long as political drift remains unresolved, the long-term private spending component of GDP should fall short of potential," Trinidad said. End of Story

Polya Lesova is a MarketWatch reporter based in New York.

Good article. Do you have the original link to this story? Thanks

As far as I know the rules of the forum state , words to the effect, that I can't post links that contain any advertising whatsoever. One of the moderators can set me straight if I'm wrong on this. I believe that if you ask me to, I can PM the link.

As far as the dividends on Thai stocks, I knew that some of them had high yields, but was also seeking to find out if any of the companies have actually been increasing their dividends each year for the last few years. I don't want a list, just curious if there are any.

OK no worries re the link. I think I understand your question re dividends now. In my experience generally most companies pay a fairly similar dividend each year but this of course depends on profits and dividend policy etc. There are always exceptions of course but I doubt most dividend payouts would rise each year faster than inflation although one can never say for certain due to said factors. I certainly can't think of any that have anyway.

[Taggart]

I think I understand your question re dividends now. In my experience generally most companies pay a fairly similar dividend each year but this of course depends on profits and dividend policy etc. There are always exceptions of course but I doubt most dividend payouts would rise each year faster than inflation although one can never say for certain due to said factors. I certainly can't think of any that have anyway.

Thanks for the info on dividend stocks in Thailand. I thought there might be at least a few companies that increase their dividends, but I guess either they can't, or else maybe they're not too shareholder friendly over there.

[Edonista]

Dividends in Thailand are "stocastic" to say the least. Stocks that paid good dividends for years can suddenly turn into junks. A few examples: CEI , FANCY, ASIAN, PAF,SPSU, SINGER,SAWANG.

The only one that managed to pay a constant (not increasing) dividend is Saha Union (SUC).

[RusT]

Dividends in Thailand are "stocastic" to say the least. Stocks that paid good dividends for years can suddenly turn into junks. A few examples: CEI , FANCY, ASIAN, PAF,SPSU, SINGER,SAWANG.

The only one that managed to pay a constant (not increasing) dividend is Saha Union (SUC).

True. I got caught holding PAF a few years back and swore off small cap stocks for good. However there are mid size and big cap stocks with stable share prices that pay decent dividends. TOP and SCC are two large companies that I can think of that pay 5% or so dividend in a year. There are also plenty of mid size companies out there that pay 6% or more.

[bkkjam]

Are there any good stock recommendations?

I'm considering buying TTA & CENTEL. Any comments?

[RusT]

Are there any good stock recommendations?

I'm considering buying TTA & CENTEL. Any comments?

For me TTA is quite high right now and the brokerage reports are mixed so I'm leaving it for the time being. Actually PSL in the shipping sector might be a possibility for me as it seems to be a healthy company with a stable long term future and not too expensive at it's current level.

I think everything looks a bit pricey at the moment, especially blue chips so I am looking at buying on the next dip. I did buy ROJANA a few days back though.

Edited June 8, 2007 by RusT

[Arkady]

Are there any good stock recommendations?

I'm considering buying TTA & CENTEL. Any comments?

For me TTA is quite high right now and the brokerage reports are mixed so I'm leaving it for the time being. Actually PSL in the shipping sector might be a possibility for me as it seems to be a healthy company with a stable long term future and not too expensive at it's current level.

I think everything looks a bit pricey at the moment, especially blue chips so I am looking at buying on the next dip. I did buy ROJANA a few days back though.

TTA is not really overvalued but it is largely driven by freight rates which have just rolled over after a massive rally. See chart of BDI here (it has been removed from most free English language websites due to legal threats from the Baltic Exchange) http://www.naftemporiki.gr/markets/quotegr...=D&cstyle=L . TTA now also has more shipping services income from its subsid Mermaid. There is more upside but TTA may have to wait for a seasonal recovery in freight rates later in the year before it makes another big move up which could be to B49 - its all time high. TTA has a low pay-out ratio, so its low PE ratio is not matched by a correspondingly high dividend yield. However, this means that it has more internally generated cash available for fleet renewal. I am holding with lowish entry costs but you might want to wait for a better entry point.

CENTEL is OK longer time and will benefit from a recovery in consumer spending but I have recently taken profits after holding it for 4 years as I thought it was quite pricey and I could make more money on other lower valuation plays in a rising market. Liquidity is poor in CENTEL, so be prepared for a long term position as you get trapped there in a falling market.

[RusT]

Arkady - given the cyclical nature of the shipping biz and the fact that the outlook doesn't seem great for the near future I'm not really looking at the sector at the moment however I am keeping my eye on PSL as it seems a good, solid company with potential for upside in share price in the mid/long term).

Just wondering if you had any thoughts on PSL yourself that you wouldn't mind sharing.

[bkkjam]

My 2 cents, I'm not a shipping expert.

PSL's future earnings look flat, i.e no growth as PSL sold 9 ships hence net cash position (which probably need to be replaced).

[RusT]

My 2 cents, I'm not a shipping expert.

PSL's future earnings look flat, i.e no growth as PSL sold 9 ships hence net cash position (which probably need to be replaced).

Thanks for your thoughts.

[Arkady]

My 2 cents, I'm not a shipping expert.

PSL's future earnings look flat, i.e no growth as PSL sold 9 ships hence net cash position (which probably need to be replaced).

Thanks for your thoughts.

I tend to agree. PSL might look smart to be short on capacity, if the price of second hand ships corrects sharply but that would probably mean you don't want to hold any shipping stocks. Right now, while the price of second hand ships is still sky high, it is hard for them to replace the ships they sold with newer vessels at a reasonable cost. I don't like the container story much at this stage or RCL, and JUTHA is a crock of.... with horrible management, so it is either TTA or nothing for me in Thai shipping.

[RusT]

My 2 cents, I'm not a shipping expert.

PSL's future earnings look flat, i.e no growth as PSL sold 9 ships hence net cash position (which probably need to be replaced).

Thanks for your thoughts.

I tend to agree. PSL might look smart to be short on capacity, if the price of second hand ships corrects sharply but that would probably mean you don't want to hold any shipping stocks. Right now, while the price of second hand ships is still sky high, it is hard for them to replace the ships they sold with newer vessels at a reasonable cost. I don't like the container story much at this stage or RCL, and JUTHA is a crock of.... with horrible management, so it is either TTA or nothing for me in Thai shipping.

Cheers for that.

[Taggart]

Thailand Court Ruling Creates `Buying Opportunity'

By Dominic G. Diongson

June 14 (Bloomberg)