Thai Stock Market Turns Bullish On Clear Political Direction

[george]

Thai stock market turns bullish on clear political direction

BANGKOK: -- The Stock Exchange of Thailand has turned bullish with the composite index breaking through a 800-point level again in Friday’s morning trading session, boosted a clear political direction and foreign investor shifting money into the stock market after the United States Federal Reserve’s decision to further cut key interest rates by 50 basis points.

The index opened more than 10 points and gained momentum to close at 805.95 points, up 21.72 or 2.77 per cent, with a heavy trading volume of 20.81 per cent, led by a continued heavy purchase of blue-chip stocks in the energy, banking, and communication sectors by foreign investors and institutional investors.

Charoen Iampattanatham, senior executive vice president of KTB Securities Co, said the SET index made a strong rally perhaps because FED had made a sharp interest cut, which encouraged foreign investors to shift money into stock markets including SET.

Late last year, he said, the foreign investors had dumped shares in the Thai bourse upon concerns over the sub-prime lending crisis in the US.

Now, they appeared to return to accumulate Thai stocks, which remain very cheap, since the political situation seemed to be clear after the new cabinet lineup is reportedly in the pipeline.

The investors were confident the new government is in a good position to drive the country’s economy.

Mr. Charoen said the SET index had a strong resistance and support at 820 and 780 points in Friday’s trading.

--TNA 2008-02-01

[Jai Dee]

Thai stocks jump 2.7% as buyers pile back in

Thai investors breathed a sigh of relief yesterday when foreign input pulled the SET index up by 2.72 per cent, but analysts were wary that it would remain buoyant.

After several days of international turmoil, the Stock Exchange of Thailand managed the biggest gain of the regional markets.

The good news came on the back of the US Federal Reserve's 50-basis-point cut and the imminent announcement of a Cabinet line-up.

Analysts warned investors not to be too bullish because of lingering US sub-prime woes and the danger of a US recession.

Foreign investors, who had been furiously unloading stocks around the world, yesterday snapped up Thai shares, in the process recording a net gain of Bt3.78 billion, the biggest one-day buy of the year. The gain is in stark contrast to the negative sale of Thai shares so far this year of Bt35.16 billion.

The SET index yesterday started with a minimal drop but then surged ahead on the foreign investors' buying spree. At one point it was up by 3 per cent, but then weakened slightly to close at 784.23. Shares worth Bt33.87 billion were traded.

The mood on the SET also affected the baht which yesterday marked a fresh 10-year high. It opened at Bt33.01-Bt33.02 to the dollar and closed at Bt33.02-Bt33.04. Currency traders said the Bank of Thailand stepped into the foreign exchange market to prevent the baht breaking through the Bt33 level.

Securities Analysts Assoc-iation secretary-general Sombat Narawutthichai said the Fed rate cut would boost the Thai bourse. But it would be short-lived as the sub-prime crisis remained and investors will be closely watch the new Cabinet line-up.

The Fed's 0.5 per cent policy rate cut came after the surprise 0.75 per cent cut last week. Economists forecast a further rate cut.

An ACL Securities analyst said there was more optimism over the health of the US economy after the rate cut.

Another analyst said the SET was now attractive with good dividend returns and cheap valuations.

But the news was not all good for home-owners. Government Housing Bank president Khan Prachuabmoh said the domestic mortgage rate might not drop as fast as in the US.

He expected the Bank of Thailand to lower its one-day repurchase rate by 25 basis points to 3 per cent at its next meeting.

The US Federal Reserve cut its policy rate by 1.25 per cent in a bid to ward off economic recession.

"I don't think we're facing trouble as serious as in the US so the central bank may only cut [its rate] by 25 basis points at the next meeting," Khan said.

He said the central bank planned to issue bonds worth Bt50 billion with a coupon rate of between 3 and 4 per cent, indicating that lending rates would remain high. Competition among commercial banks for deposits was another sign the lending rate would not fall quickly.

The GHB also planned to raise funds worth Bt5 billion through a bond issue and he wanted the new government to guarantee the bonds.

If the government did not, the GHB bonds would be about 50-60 basis points higher than the government bonds, he said.

Source: The Nation - 01 February 2008

[Irene]

There are so many favourable factors appeared within one day, not only Thai political direction towards respectability. The following are the factors that coincide nicely with the local factor:

First, Baht is stronger and likely to be even stronger because of flooring of US interest rate. Therefore, foreigners are likely to come in more for double dips of exchange gain and capital gain.

Second, foreign portion has already exhausted in selling their stocks in hand. Net buying by foreigners reached 8.2 billion while local institutions and retails sold that net sum.

Third, CNBC survey and many started to opine that the likelihood of US recession is now less than 50% chance.

Fourth,volume trading amounted to 40 billion plus which strengthens the belief that the buying may be real.

Fifth, the US bad news on the write downs appear to be exhausted.

Sixth, it appears inevitable that the US government has to help to protect too deep a fall for the sake of coming election.

In conclusion, since the beginning of subprime crisis in August 07, I have never seen things to come in so nicely like the last two days. Did I put my money where my mouth is? Yes, plenty.

What are my fears?

The lining up of the Thailand cabinet minister is so nameless to disturb the confidence of the investors.

Second, my assessment of the US economy is far off mark and the recession truly creeps in.

Third, today's investment from foreigners was only a blip and it won't be followed through.

I may have missed other factors that could have caused the deep dip. I love to read the thoughts of others.

[ace]

My thoughts,

I think the general composition and direction of the incoming government has been known for some time. I don't see why a press release should make such a difference.

The slavish following of the US stock market by Thai market traders indicates to me that they are simply taking the easy option every time, which surprises me not at all.

US is in recesion. Growth quarter on quarter from 4.9 to 0.6 % Unemployment up for 1st time in years. Real value in shares, housing, wiped out. Earnings down outside of oil / mining.

Fed is a 1 trick pony which is really, really, flogging the heck out of a dead horse (the American consumer being the horse). They've been through the bubbles, there's no place left to go unless an imaginative, intelligent, creative government leads from the front in a "Hooverite" manner. Not going to happen. I mean, where's the silver lining (for the US)?

Ace