Political Woes Worry Analysts, Survey Finds

[Jai Dee]

Political woes worry analysts, survey finds

Political fallout stemming from the Shin Corp share transfers could have a negative impact on the stock market in the medium term, according to a survey by the Securities Analysts Association.

In a poll of 20 securities firms that hold more than half of the market share, analysts said the largest political concern was the public outcry over the 73.3-billion-baht Shin Corp share transfer from Prime Minister Thaksin Shinawatra’s family to Temasek Holdings.

Analysts also worried that corruption, a split in the Thai Rak Thai factions and the growth of anti-government groups could weigh down the market in the months ahead.

“I don’t think the political problems are short term,” said Jittima Angsuwarangsri, an executive vice-president at Far East Securities. “This problem is still not clear. Nobody knows what will happen. It should hang over the market for awhile.”

The Stock Exchange of Thailand (SET) index dropped 8.74 points, or 1.18 percent, in trading yesterday as political uncertainty lingers.

Anti-government crusader Sondhi Limthongkul defiantly announced yesterday that the anti-Thaksin coalition would hold another rally at the Royal Plaza this weekend, despite government statements declaring the area off-limits.

As for positive news for the market, analysts said overall economic management and government policy could boost the economy.

A majority believed market conditions would improve drastically if Thaksin and Sondhi resolved their differences, and the prime minister cleared up lingering doubts regarding his family’s sale of Shin shares.

Companies that benefit from the current shaky political environment include media and publishing companies, internet firms and paper manufacturers, analysts said.

Industries that suffer include construction, real estate and telecommunications.

To solve the current political woes, analysts said the government should be more transparent, allow more participation from the public, end corruption and focus on the benefits the public can receive from steady economic growth.

In a separate survey released yesterday by the same organization, 22 brokerages said the economy would grow an average of 4.9 percent this year, while earnings per share (EPS) growth would hit only 4.8 percent.

Lagging EPS growth this year is primarily a result of higher profits last year, which reduced the growth potential for listed companies, said Sombat Narawutthichair, deputy chairman of the Securities Analysts Association.

“All in all, I think EPS growth will be two to three percent but this depends on the price of energy as well,” he told reporters yesterday, adding that energy giant PTT comprises about a quarter of the weighting for EPS on the local bourse.

Analysts also thought the SET index would close the year at 808 points, a one-percent decrease from a similar survey conducted last October. Respondents said the baht would finish the year at 39.7 to the dollar, though responses varied from 38.5 to 41.5.

The most attractive sectors for investors include banks, energy and property, while punters should avoid petrochemicals, freight and steel stocks, the survey found. As is typically the case, analysts said big-cap stocks are safer plays.

Source: ThaiDay - 9 February 2006