Thai Stocks: Sell, Say Foreign Brokers

[george]

THAI STOCKS: Sell, say foreign brokers

BANGKOK: -- Blame put on slump, oil-price hike and current account gap. Most foreign brokerages have recommended “sell” on Thai stocks due to poorer economic growth prospects, higher oil prices and worsening current-account deficit.

The downgrades have sparked an exodus by foreign investors, who dumped a net Bt4.8 billion of stock between June 30 and yesterday. The market ended slightly higher yesterday as easing global oil prices overnight helped the SET index regain ground after five straight days of retreat.

“Today is a pure technical rebound without strong fundamental support,” Padermpob Songkroh, a strategist at Bualuang Securities, said yesterday. The index fell almost 6.9 per cent over the last five sessions, with a 3.3-per-cent dive on Thursday.

The SET index rose five points, or 0.8 per cent, to 643.31, from an opening low of 630.71.

In currency markets, the baht weakened sharply against the US dollar, breaking through the Bt42-psychological level on lacklustre sentiment.

Citigroup Smith Barney said in a report that it had cut Thailand’s investment weighting significantly from overweight to underweight as the country’s macroeconomic momentum had continued to deteriorate and was unlikely to improve soon.

Earnings growth next year will be even lower than this year at 4.4 per cent, the report said.

Credit Suisse has also downgraded Thailand to underweight as it considers that Thailand and the Philippines are oil-dependent countries. The high oil prices have the potential to brake growth this half if prices do not fall sharply.

“In Thailand and the Philippines the overall trade position is deteriorating sharply and threatens currency weakness going forward,” Credit Suisse said.

“If central banks remain worried about inflation, interest rate hikes [aimed at supporting the currency] have the potential to crunch domestic demand. The macro risks for Thailand and the Philippines are rising by the day in our view, and earnings estimates are likely to be cut as growth slows.”

ABN Amro is the most pessimistic of the foreign brokers in forecasting Thailand’s economic growth, but it has shifted its investment weighting in the country only from overweight to neutral.

ABN Amro revised downward GDP growth this year to 2.8 per cent and predicted that the current-account deficit would widen to 3.8 per cent of GDP.

“After a strong performance in the first quarter of 2005, the Thai market fell heavily in the second quarter and was the worst-performing market in the region. Surging oil prices are becoming an increasingly heavy burden for the Thai economy and market,” it said.

“Having consistently maintained a sizeable current-account surplus since the Asian crisis, surging oil imports and slowing exports have brought the year-to-May deficit to US$4.6 billion [bt192 billion], equivalent to 2.9 per cent of last year’s total GDP.”

Not only have foreign brokers cut Thailand’s investment weight; local houses have also revised their recommendations to underweighting Thai stocks. Tisco Securities has cut the year-end SET target from 750 to 720, while MFC Asset Management has lowered the target from 805 to 730.

Foreign investors accumulated Thai shares with a net position of Bt140 billion-Bt150 billion between late August and February, betting that the Thai Rak Thai Party would win the general election and steer the country on a healthy growth path.

Yet that sentiment quickly evaporated following a series of negative news, from the higher oil prices, inflationary pressures, rising interest rates and widening current-account deficit to the prospects of slower growth.

--The Nation 2005-07-09

[george]

Set index likely to recover in 1-2 weeks

BANGKOK: -- The Stock Exchange of Thailand’s index is expected to recover and become more stable in the next 1-2 weeks following a plunge by more than 21 points in yesterday’s trading due to mounting investor concern on many negative factors engulfing the market, according to a top securities analyst.

Kongkiat Opaswongkarn, President of the Securities Analysts’ Association, attributed the plunge in the SET index to the investor concern on rising oil prices, accounting fraud of Picnic Corporation Plc, and high speculations on some small stocks.

As well, some investors were also forced to cut loss by selling some stocks by brokerage houses and other dumped shares to hold cash to reduce risks

He viewed the continued sale of shares by foreign investors are just a short-term adjustment to their investment portfolios so that they could transfer some cash to invest in the secondary market.

He believed most foreign investors still maintained an overweight investment outlook for the Thai bourse because they remained confident of the country’s economy. However, they had begun to slow investment since they had already invested a lot.

“The investment sentiment in the stock market is expected to improve in the next 1-2 weeks when the dust settles. Now, many negative factors engulfing the market such as forced sale by some brokers and high speculations on some small stocks have begun to ease,” he said.

Dr. Kongkiat conceded brokerage houses had revised downward performances of listed companies, except those in the energy sector, in the second quarter of this year since they experienced higher costs upon rising fuel prices.

However, most companies remained in a position to pay dividend at a higher rate than interest rates offered by commercial banks, he said.

--TNA 2005-07-08

[Martin]

"However, most companies remained in a position to pay dividend at a higher rate than interest rates offered by commercial banks, he said."

Which of them have the best prospects?

Can anybody tell us of a company that makes thermal underwear and exports to Northern Europe ?.

Even in net-oil-exporting countries, like the UK, people are blanching at how much it is going to cost them to fill their central heating fuel tanks and are open to suggestions on how to reduce that fuel need.

Long Johns aren't sexy----but neither is a frozen willie.

So if there is a Thai company who is in there alongside Damart, please tell.