Stocks will be seriously overvalued if the SET Index reaches 760 points, the Securities Analysts Association warned yesterday, while the market got a downฌgrade from overweight to neutral by MFC Asset Management.
The SET Index has rallied about 90 per cent from the year's trough at about 380 points and it would have doubled at 760, SAA secretarygenฌeral Sombat Narawuttichai said.
At that point, it would risk a steep correction from profittaking, he said.
Even at 700 the SET exceeds its fundamental value based on pricetoearnings (P/E) and discounted cashflow analyses.
The economy can support the SET at only 630-650, some analysts have said.
About 40 per cent of all market securities are overvalued, 50 per cent are undervalued and 10 per cent are in line with their fundamentals.
Thai shares have jumped 61 per cent so far this year, underperforming the Asian region.
Vietnam's Ho Chi Minh Stock Index has gained 84 per cent, Jakarta Composite Index 81 per cent and India's Sensex 74 per cent.
Even though the SAA and MFC Asset Management said the SET Index over 700 points is overvalued, Asia Plus Securities CEO Kongkiat Opaswongkarn and ING Funds (Thailand) managing director Maris Tarab recently estimated that shares would reach 800 within this year.
Sombat said 91 per cent of analysts responding to the SAA's survey were moderately confident in the government's Strong Thailand economic stimulus package, and 9 per cent were highly confident.
Altogether 23 securities analysts answered the questionnaire after the SAA and analysts met Finance Minister Korn Chatikavanich on September 11.
About threefourths of the respondents have medium confidence and the others have high confidence.
Four per cent of the respondents are not confident that the government's investment scheme can go on until 2012 as planned regardless of political changes, 43 per cent have low confidence, 48 per cent have medium confidence and the rest have high confidence.
The analysts agreed unanimously that construction and building material companies would benefit from the scheme but some stocks were overvalued.
After meeting with Korn, some analysts started preparing to upgrade the country's 2010 gross domestic product forecast by about 1 percentage point from the SAA's current consensus of 3 per cent.
Supakorn Soontornkit, senior executive vice president of MFC, told reporters that his company downgraded the stock market as it exceeds his company's base and bestcase scenario for 2009 at 675 and 720 points, respectively.
"I expect that funds flow will continue and shortterm investors can still pile up on stocks but they must be prudent. The SET Index will not reach the 800 level. However, it will not fall below 700 points," he said.
MFC forecasts the SET at 680 in the worstcase, 750 in the basecase and 820 in the bestcase scenarios for next year.
His company recommends investing in three to four-year debt instruments offering coupon rates of 3.54 per cent but avoiding putting money in shorter debt instruฌments as yields are going up.
It is also slightly overweight on commodities and real estate investment trusts.
Pichit Akrathit, president of MFC Asset Management, said his company is marketing the I-Emerging 10 Fund until Monday.
The fund's policy is to invest in equities, debt instruments and deposits in emerging countries worldwide, depending on market conditions.
MFC plans to launch a property fund investing in an office building in Bangkok as well as the Thailand Creativity Fund, investing in innoฌvative businesses.
Friday, September 25, 2009
BUBBLE FEARS DISMISSED
The economy is not developing a bubble as asset prices have not risen beyond the fundamental level, while political uncertainty has also put pressure on economic growth, Kasikornbank president Prasarn Trairatvorakul said yesterday. His comment was in reaction to the Asian Development Bank's statement on Tuesday that it is concerned the Thai economy could develop a bubble as the low cost of funding may lead developers to borrow too much for investment in property assets.
The ADB now forecasts the economy will contract by 3.2 per cent this year.
Prasarn, a former secretarygeneral of the Securities and Exchange Commission and exBank of Thailand official, pointed to the fact that a bubble in the economy generally reflected asset prices that are higher than the fundamental level. Since the 1997 financial crisis, he said, Thai businesses had been very cautious.
So far, he added, the SET Index had rallied significantly as investors expect the Thai economy will recover soon. But the index has also recently corrected, which is a normal movement. Therefore, he does not believe the economy is inflating into a bubble.
Moreover, Prasarn commented that the ADB's forecast of 2009 growth was not too pessimistic given Thailand still faced risk from political uncertainty, which put pressure on economic growth. The political unrest directly affects tourism and domestic consumer confidence, which constrains growth more than in neighbouring countries.
"The Thai economy seems to have recovered this quarter, which is likely to record positive growth compared to the second quarter. And in the fourth quarter, the economy will grow positively as a result of an improvement in the world economic situation. The US, Europe and [notably] Germany show clear recovery signs," he said.
This year, he predicts, the Thai economy is likely to record a contraction of 3 per cent.
Thus, Kasikornbank's net lending will increase by around 4 per cent, against the previous target of 45 per cent. Currently, all sectors - including large corporations, small and mediumsized enterprises and retailers - are expanding.
Credit for investment expansion has returned, he added. For example, the masstransit project, which was postponed early this year, has already started.
In addition, the bank will keep its net interest margin in the targeted range of 3.83.9 per cent by managing its credit expansion rather than competing on pricing.
Prasarn said Kasikornbank's interestrate trend remained stable. However, in the first half of next year, both lending and deposit rates are likely to rise, reflecting economic recovery and less liquidity in the system.
The Bank of Thailand's policy rate is likely to increase after commercial banks hike their rates. Prasarn expects the central bank's policy rate to start rising in the second quarter of next year.
He believes the baht's value will keep appreciating as Thailand has a currentaccount surplus as well as continuing capital inflow.
The ADB now forecasts the economy will contract by 3.2 per cent this year.
Prasarn, a former secretarygeneral of the Securities and Exchange Commission and exBank of Thailand official, pointed to the fact that a bubble in the economy generally reflected asset prices that are higher than the fundamental level. Since the 1997 financial crisis, he said, Thai businesses had been very cautious.
So far, he added, the SET Index had rallied significantly as investors expect the Thai economy will recover soon. But the index has also recently corrected, which is a normal movement. Therefore, he does not believe the economy is inflating into a bubble.
Moreover, Prasarn commented that the ADB's forecast of 2009 growth was not too pessimistic given Thailand still faced risk from political uncertainty, which put pressure on economic growth. The political unrest directly affects tourism and domestic consumer confidence, which constrains growth more than in neighbouring countries.
"The Thai economy seems to have recovered this quarter, which is likely to record positive growth compared to the second quarter. And in the fourth quarter, the economy will grow positively as a result of an improvement in the world economic situation. The US, Europe and [notably] Germany show clear recovery signs," he said.
This year, he predicts, the Thai economy is likely to record a contraction of 3 per cent.
Thus, Kasikornbank's net lending will increase by around 4 per cent, against the previous target of 45 per cent. Currently, all sectors - including large corporations, small and mediumsized enterprises and retailers - are expanding.
Credit for investment expansion has returned, he added. For example, the masstransit project, which was postponed early this year, has already started.
In addition, the bank will keep its net interest margin in the targeted range of 3.83.9 per cent by managing its credit expansion rather than competing on pricing.
Prasarn said Kasikornbank's interestrate trend remained stable. However, in the first half of next year, both lending and deposit rates are likely to rise, reflecting economic recovery and less liquidity in the system.
The Bank of Thailand's policy rate is likely to increase after commercial banks hike their rates. Prasarn expects the central bank's policy rate to start rising in the second quarter of next year.
He believes the baht's value will keep appreciating as Thailand has a currentaccount surplus as well as continuing capital inflow.
Rebound in commodities carries stocks higher
A rebound in commodities is drawing investors back into the stock market.
Major stock indicators rebounded Tuesday from a drop the day earlier. The Dow Jones industrials rose 51 points after losing 41 on Monday.
In an about-face, the dollar weakened against other major currencies and commodities like oil and gold bounded higher, lifting energy and mater ial stocks. Financial stocks also rose sharply.
The gains came as the Federal Reserve began a twoday meeting on interest rates. Investors are hoping the Fed will provide a clearer indication of when it may raise rates when it issues a statement at the conclusion of the meeting yesterday.
The Fed is widely expected to keep rates at their record low of near zero for the time being. Rockbottom interest rates have helped fuel the market's nearly seven-month old ra lly, making cash plentiful and cheap and encouraging investors to buy up riskier assets.
The market appears to be following a well-established pattern where brief selloffs are met with more buying as investors fear missing out on a continued rally.
"Reluctantly, investors are continually being dragged into a market that is finding a path of least resistance to the upside," said Art Hogan, chief market analyst at Jefferies & Co.
The consensus on Wall Street is that the economy is healing despite ongoing challenges like unemployment. But investors still have doubts over how strong the recover y will be, and whether the stock market's more than 50% move off of 12-year lows in Marc h accurately reflects the still fragile state of the economy.
"Right now, it's a more orderly market," said Greg Reynholds, senior vice president of asset management at Lenox Advisors. "People are digesting the data, trying to figure out exactly where we're headed."
The Dow Jones industrial average ro se 51.01, or 0.5%, to 9,829.87. The Standard & Poor's 500 index gained 7.00, or 0.7%, to 1,071.66, while the Nasdaq composite index rose 8.26, or 0.4%, to 2,146.30.
More than two stocks rose every one that fell on the New York Stock Exchange, where volume came to 1.3 billion shares compared with 1.2 billion Monday.
In other trading, the Russell 2000 index of smaller companies rose 4.72, or 0.8%, to 620.69.
Gold and silver prices rose after three days of drops,while oil prices gained $1.69 to $71.40 a barrel on the New York Mercantile Exchange.
Commodities rose as the US dollar index, which measures the greenback against a basket of foreign currencies, fell 0.8%, after earlier hitting a fresh low for the year. The dollar has fallen sharply since early March,making commodities cheaper for foreign investors, as its appeal wanes amid low interest rates and unprecedented government spending designed to stimulate the economy.
Demand for energy and material stocks increased as commodities rose. US Steel Corp added $2.22, or 4.6%, to $50.24, while Chesapeake Energy Corp jumped $1, or 3.6%, to $29.11.
Financial stocks were mostly higher after Rochdale Securities analyst Richard Bove raised his target price on Bank of America Corp to $25 a share. Shares of the Charlotte, NC-based bank rose 36 cents, or 2.1%, to $17.61.
Among technology stocks, Google In c. shares hit a 13-month high after a Canaccord Adams analyst raised the target price on the stock to $560. Shares rose as high as $501.99 and ended at $499.06, a gain of $2.06.
In economic news Tuesday, a government index showed US home pr ices r ose 0.3% in July from the previous month. The index is still 4.2% below last year's levels.
After soaring 50.1% since hitting a 12-year low in early March, the Dow stands 170 points below the 10,000 mark _a level the average first crossed in March 1999 and hasn't been above since October.
Bond prices rose slightly. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.45% from 3.49% late Monday. AP
LONDON 5,142.60 +8.24
European shares closed higher on Tuesday, snapping a two-day losing streak as a stronger commodity sector tracked firmer crude and metals prices that were supported by a weaker dollar.
Britain's top share index edged higher as miners and oil stocks buoyed by firmer commodity pr ices lent support, though with investors nervous before the Group of 20 leaders' meeting at the end of the week.
The FTSE 100 closed at 5,142.6 points, up 8.24 or 0.16%.
In Frankfurt, the DAX index ended at 5,709.38 points,up 40.73 or 0.72%.
In Paris, the CAC-40 index closed at 3,823.52 points,up 11.36 or 0.30%.
The pan-European FTSEurofirst 300 index of top shares closed up 0.5% at 1,004.41 points. The European index has rallied nearly 56% since hitting a low in March and is up around 18% this quarter, on track to post its best quarterly rise in almost a decade.
"A fairly positive tone to the day. I think it is a general notion that the recession is ov er and the economy is only going to improve from here," said Peter Dixon, economist at Commerzbank.
US Treasury Secretary Timothy Geithner said the US economy appeared to be gathering steam and G20 leaders meeting in Pittsburgh this week would strive to ensure the recovery was balanced.
'But there is a growing sense we are getting a bit ahead of ourselves. We have had a pause in recent days ... and I expect the trend over the next few days is going to be flat," Dixon said.
Energy stocks added most points to the index as oil rose above $71 a barrel, recovering from a sharp fall the previous day. BP, Royal Dutch Shell and Total were 0.7 to 0.9% higher. Miners tracked metals prices higher, with copper and nickel up 1.6 and 3.9%, respectively.
Eurasian Natural Resources Corporation, Rio Tinto and Xstrata rose between 1.1 to 4.4%. Drugmakers,which have lagged behind the rally and offer relatively higher and steadier yields, were also in demand.
Roche gained 1.4% after Phase II data showed that Avastin, which has already been shown to help patients with brain cancer stay alive longer without their condition worsening, may also improve their daily lives.
Banks found favour, with Credit Suisse gaining nearly 3%. The Swiss group is confident it can keep private banking margins between 110 to 120 basis points over the long term and expects average annual net new money growth of 6%.
Banco Santander, Credit Agr icole and Deutsche Bank were up 0.7 to 1.7%. Looking ahead, investors will look closely at the outcome of the two-day Federal Reserve policy meeting which ends yesterday.
Economists expect the FOMC to hold the target range for interest rates steady at zero to 0.25%.
With steering the global economy out of recession the key focus for the G20 leaders meeting in Pittsburgh today and Friday, markets will be looking for any comment indicating the Fed might wind back its stimulus measures given improving macroeconomic data.
"The issue of exit strategies is likely to remain key for policymakers globally, at this week's G20 summit and beyond. It is the outlook for subdued inflation that gives the necessary breathing space for policy support to be withdrawn cautiously," Barclays Wealth said in a note.
Major stock indicators rebounded Tuesday from a drop the day earlier. The Dow Jones industrials rose 51 points after losing 41 on Monday.
In an about-face, the dollar weakened against other major currencies and commodities like oil and gold bounded higher, lifting energy and mater ial stocks. Financial stocks also rose sharply.
The gains came as the Federal Reserve began a twoday meeting on interest rates. Investors are hoping the Fed will provide a clearer indication of when it may raise rates when it issues a statement at the conclusion of the meeting yesterday.
The Fed is widely expected to keep rates at their record low of near zero for the time being. Rockbottom interest rates have helped fuel the market's nearly seven-month old ra lly, making cash plentiful and cheap and encouraging investors to buy up riskier assets.
The market appears to be following a well-established pattern where brief selloffs are met with more buying as investors fear missing out on a continued rally.
"Reluctantly, investors are continually being dragged into a market that is finding a path of least resistance to the upside," said Art Hogan, chief market analyst at Jefferies & Co.
The consensus on Wall Street is that the economy is healing despite ongoing challenges like unemployment. But investors still have doubts over how strong the recover y will be, and whether the stock market's more than 50% move off of 12-year lows in Marc h accurately reflects the still fragile state of the economy.
"Right now, it's a more orderly market," said Greg Reynholds, senior vice president of asset management at Lenox Advisors. "People are digesting the data, trying to figure out exactly where we're headed."
The Dow Jones industrial average ro se 51.01, or 0.5%, to 9,829.87. The Standard & Poor's 500 index gained 7.00, or 0.7%, to 1,071.66, while the Nasdaq composite index rose 8.26, or 0.4%, to 2,146.30.
More than two stocks rose every one that fell on the New York Stock Exchange, where volume came to 1.3 billion shares compared with 1.2 billion Monday.
In other trading, the Russell 2000 index of smaller companies rose 4.72, or 0.8%, to 620.69.
Gold and silver prices rose after three days of drops,while oil prices gained $1.69 to $71.40 a barrel on the New York Mercantile Exchange.
Commodities rose as the US dollar index, which measures the greenback against a basket of foreign currencies, fell 0.8%, after earlier hitting a fresh low for the year. The dollar has fallen sharply since early March,making commodities cheaper for foreign investors, as its appeal wanes amid low interest rates and unprecedented government spending designed to stimulate the economy.
Demand for energy and material stocks increased as commodities rose. US Steel Corp added $2.22, or 4.6%, to $50.24, while Chesapeake Energy Corp jumped $1, or 3.6%, to $29.11.
Financial stocks were mostly higher after Rochdale Securities analyst Richard Bove raised his target price on Bank of America Corp to $25 a share. Shares of the Charlotte, NC-based bank rose 36 cents, or 2.1%, to $17.61.
Among technology stocks, Google In c. shares hit a 13-month high after a Canaccord Adams analyst raised the target price on the stock to $560. Shares rose as high as $501.99 and ended at $499.06, a gain of $2.06.
In economic news Tuesday, a government index showed US home pr ices r ose 0.3% in July from the previous month. The index is still 4.2% below last year's levels.
After soaring 50.1% since hitting a 12-year low in early March, the Dow stands 170 points below the 10,000 mark _a level the average first crossed in March 1999 and hasn't been above since October.
Bond prices rose slightly. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.45% from 3.49% late Monday. AP
LONDON 5,142.60 +8.24
European shares closed higher on Tuesday, snapping a two-day losing streak as a stronger commodity sector tracked firmer crude and metals prices that were supported by a weaker dollar.
Britain's top share index edged higher as miners and oil stocks buoyed by firmer commodity pr ices lent support, though with investors nervous before the Group of 20 leaders' meeting at the end of the week.
The FTSE 100 closed at 5,142.6 points, up 8.24 or 0.16%.
In Frankfurt, the DAX index ended at 5,709.38 points,up 40.73 or 0.72%.
In Paris, the CAC-40 index closed at 3,823.52 points,up 11.36 or 0.30%.
The pan-European FTSEurofirst 300 index of top shares closed up 0.5% at 1,004.41 points. The European index has rallied nearly 56% since hitting a low in March and is up around 18% this quarter, on track to post its best quarterly rise in almost a decade.
"A fairly positive tone to the day. I think it is a general notion that the recession is ov er and the economy is only going to improve from here," said Peter Dixon, economist at Commerzbank.
US Treasury Secretary Timothy Geithner said the US economy appeared to be gathering steam and G20 leaders meeting in Pittsburgh this week would strive to ensure the recovery was balanced.
'But there is a growing sense we are getting a bit ahead of ourselves. We have had a pause in recent days ... and I expect the trend over the next few days is going to be flat," Dixon said.
Energy stocks added most points to the index as oil rose above $71 a barrel, recovering from a sharp fall the previous day. BP, Royal Dutch Shell and Total were 0.7 to 0.9% higher. Miners tracked metals prices higher, with copper and nickel up 1.6 and 3.9%, respectively.
Eurasian Natural Resources Corporation, Rio Tinto and Xstrata rose between 1.1 to 4.4%. Drugmakers,which have lagged behind the rally and offer relatively higher and steadier yields, were also in demand.
Roche gained 1.4% after Phase II data showed that Avastin, which has already been shown to help patients with brain cancer stay alive longer without their condition worsening, may also improve their daily lives.
Banks found favour, with Credit Suisse gaining nearly 3%. The Swiss group is confident it can keep private banking margins between 110 to 120 basis points over the long term and expects average annual net new money growth of 6%.
Banco Santander, Credit Agr icole and Deutsche Bank were up 0.7 to 1.7%. Looking ahead, investors will look closely at the outcome of the two-day Federal Reserve policy meeting which ends yesterday.
Economists expect the FOMC to hold the target range for interest rates steady at zero to 0.25%.
With steering the global economy out of recession the key focus for the G20 leaders meeting in Pittsburgh today and Friday, markets will be looking for any comment indicating the Fed might wind back its stimulus measures given improving macroeconomic data.
"The issue of exit strategies is likely to remain key for policymakers globally, at this week's G20 summit and beyond. It is the outlook for subdued inflation that gives the necessary breathing space for policy support to be withdrawn cautiously," Barclays Wealth said in a note.
Funds stabilise as 'vanished' cash returns
Thailand's fund industry has returned to normal, with net assets under management industry-wide projected to exceed 1.82 trillion baht in 2010, according to Pichit Akrathit, the president of MFC Asset Management.
The figure would represent a 3.73%increase from the 1.75 trillion baht now managed by local funds, and is based on a 2010 target for the Stock Exchange of Thailand index of 820 points.
Portfolio assets held by the asset management industry would fall to around 1.804 trillion baht assuming the SET index stayed at around 750 points in 2010.
he index closed yesterday at 730.52 points, up 6.15, in trade worth 32.5 billion baht.
Dr Pichit said that from August to November 2008,130 billion baht in assets vanished from the local fund industry.
The funds have since returned over the past four months, he said, adding that there was a 60% correlation between the SET and net asset values for the fund industry.
Local stocks also still have room to move upward, even with the more than 60% gain posted by the SET for the year to date.
Dr Pichit noted that over the past year, foreign investors had injected 40 billion baht in funds into local stocks,representing just 20% of the total outflows seen during the global crisis.
He added that Thailand's financial system had also shown signs of growing maturity, with fund assets now accounting for 27.8% of total bank deposits compared with 20% before the global financial crisis.
By the end of 2010, total net assets held by local funds is projected to rise to 28.8% of bank deposits.
Narongchai Akrasanee, the chairman of MFC Asset Management, agreed that global financial markets have largely normalised.
"Still, there remains a number of risk factors that deserve close monitoring,including the extent of financial losses post-crisis and the speed in which the real sector recovers," he said.
Supakorn Soontornkit, a senior executive vice-president at MFC Asset Management, cautioned that local stocks could see a short-term correction on profit-taking that could push the index to 680 to 700 points.
MFC plans to launch several new funds over the next few months, including a commercial property fund now in the filing process with the Securities and Exchange Commission.
The company also expects to see progress under the Thailand Creativity Fund,a new fund to be placed with institutional investors and emphasising investments in innovative companies.
The figure would represent a 3.73%increase from the 1.75 trillion baht now managed by local funds, and is based on a 2010 target for the Stock Exchange of Thailand index of 820 points.
Portfolio assets held by the asset management industry would fall to around 1.804 trillion baht assuming the SET index stayed at around 750 points in 2010.
he index closed yesterday at 730.52 points, up 6.15, in trade worth 32.5 billion baht.
Dr Pichit said that from August to November 2008,130 billion baht in assets vanished from the local fund industry.
The funds have since returned over the past four months, he said, adding that there was a 60% correlation between the SET and net asset values for the fund industry.
Local stocks also still have room to move upward, even with the more than 60% gain posted by the SET for the year to date.
Dr Pichit noted that over the past year, foreign investors had injected 40 billion baht in funds into local stocks,representing just 20% of the total outflows seen during the global crisis.
He added that Thailand's financial system had also shown signs of growing maturity, with fund assets now accounting for 27.8% of total bank deposits compared with 20% before the global financial crisis.
By the end of 2010, total net assets held by local funds is projected to rise to 28.8% of bank deposits.
Narongchai Akrasanee, the chairman of MFC Asset Management, agreed that global financial markets have largely normalised.
"Still, there remains a number of risk factors that deserve close monitoring,including the extent of financial losses post-crisis and the speed in which the real sector recovers," he said.
Supakorn Soontornkit, a senior executive vice-president at MFC Asset Management, cautioned that local stocks could see a short-term correction on profit-taking that could push the index to 680 to 700 points.
MFC plans to launch several new funds over the next few months, including a commercial property fund now in the filing process with the Securities and Exchange Commission.
The company also expects to see progress under the Thailand Creativity Fund,a new fund to be placed with institutional investors and emphasising investments in innovative companies.
EXPORTERS URGED TO COVER RISK
Exporters have been advised to cover their currency risk, with the baht likely to remain volatile against the greenback toward yearend and both the euro and yen having strengthened in recent months. The Thai unit is however expected to remain strong at around 33-33.50 per dollar.
The US dollar yesterday weakened for the first time in three days against the euro on speculation that Group-of-20 leaders this week will call for gains in other currencies to help reduce global trade imbalances.
The baht rose toward a 13-month high as losses in the dollar led to speculation the Bank of Thailand will tolerate gains in the currency as the economy recovers. Amid capital inflows, Thai stocks yesterday jumped 1.57 per cent or 11.21 points to close at a 14month high of 724.37, while the bluechip SET50 gained 8.64 points to close at 517.04.
"It [US dollar] has been oversold over the medium term. Thus, it will be volatile toward the year's end …We still maintain our forecast at Bt33.5 a dollar within this year," said Usara Wilaipich, senior economist of Standard Chartered Bank (Thai).
The baht rose 0.2 per cent to 33.64 per dollar as of 5pm yesterday in Bangkok, according to data compiled by Bloomberg. The currency reached 33.61, the strongest level since August 2008. It has gained 3 per cent so far this year, the thirdbest performance among the region's 10 mosttraded currencies.
However, Usara warned that aside from US dollar, exporters and importers should also monitor the euro and yen, which have been much stronger over the past seven months. They are therefore recommended to cover their currency risk for these two currencies as well.
The US currency dropped to $1.4714 per euro as of 1.31pm in Tokyo, from $1.4680 the previous day in New York. It declined to 91.75 yen from 91.93 yen and weakened to $1.6237 per pound sterling from $1.6217. The yen was little changed at 135.01 versus the euro from 134.96.
Usara said the US dollar was likely to remain weak as greenback liquidity was still flooding the market, as with a threemonth LIBOR low for the dollar at lower than 0.3 per cent, it had become a carrytrade currency. Moreover, the market believes the greenback could continue to remain weak.
Today, the US Federal Open Market Committee will announce its stance on whether to maintain the quantitative easing or to announce an "exit plan". If easing is maintained, the dollar will continue weakening, she added.
Nitinai Sirismatthakarn, senior vice president, Research Group, SCB Securities, believes the baht will remain at around 33 per dollar or slightly weaker over the next three to four months.
He said the Bank of Thailand is expected to keep the baht level moving in tandem with the Kingdom's trading peers.
Last week, he said, the baht had weakened by 30 satang, which means the central bank intervened slightly more than other regional central banks had done in their currencies. Otherwise, the baht would have strengthened by 50 satang, he added.
The baht's value, Nitinai said, also depended more on capital inflows, which are expected to be significant but not as huge as in the past.
"It's just a dollar play," said Tetsuo Jerry Yoshikoshi, a senior economist with Sumitomo Mitsui Banking Corp in Singapore. "The Bank of Thailand has allowed the baht to strengthen a bit. Some traders must be convinced that the central bank is now more tolerant."
Sukit Udomsirikul, assistant managing director at Siam City Research Institute, said the baht was tending to appreciate to 33 to 32 per dollar on the back of the continuous capital inflow, which is likely to result in the SET Index reaching the 800-point mark.
However, he warned that if foreign investors' net buying on the stock market was Bt30 billion a month, it would be an alarming sign because such a level would indicate excessive cash flow.
Since the beginning of this month, foreign investors have bought Thai shares with a net amount of Bt18 billion.
Sukit voiced concern that the global economy, including Asia, could face a fresh round of economic bubble due to the flood of capital inflow to speculate in stock markets and currencies amid the trend of a weak US dollar.
Stock markets will drop sharply in the second quarter next year on anticipation that central banks will change to a hawkish mode by jacking up their policy rates. This is expected to be seen in the first quarter at the earliest following rising inflationary pressure, he said.
"The further the world travels along the road to economic recovery, the greater the amount of fund flows, particularly to the region, pushing up the baht. While appreciation of the baht favours industries with high import content, it harms export industries," SCB Securities said in a note released yesterday.
The brokerage said petroleum refineries and the motor vehicle and industrial machinery sectors would take advantage of the trend of a stronger baht.
However, the rubber products, rice and sugar sectors will experience difficulties.
Overseas investors bought US$549 million (Bt18.5 billion) more Thai equities than they sold this month through yesterday, while the SET Index of shares climbed 9 per cent in the same period.
Finance Minister Korn Chatikavanij said on September 18 that there was "no overt policy" for a targeted baht rate. The Dollar Index, which ICE uses to track the greenback against its six major trading partners, fell 0.3 per cent yesterday before the Federal Reserve met to set interest rates this week.
According to all 93 economists surveyed by Bloomberg News, the Fed will keep its target rate for overnight loans within a range of zero to 0.25 per cent at its twoday policy meeting.
The US dollar yesterday weakened for the first time in three days against the euro on speculation that Group-of-20 leaders this week will call for gains in other currencies to help reduce global trade imbalances.
The baht rose toward a 13-month high as losses in the dollar led to speculation the Bank of Thailand will tolerate gains in the currency as the economy recovers. Amid capital inflows, Thai stocks yesterday jumped 1.57 per cent or 11.21 points to close at a 14month high of 724.37, while the bluechip SET50 gained 8.64 points to close at 517.04.
"It [US dollar] has been oversold over the medium term. Thus, it will be volatile toward the year's end …We still maintain our forecast at Bt33.5 a dollar within this year," said Usara Wilaipich, senior economist of Standard Chartered Bank (Thai).
The baht rose 0.2 per cent to 33.64 per dollar as of 5pm yesterday in Bangkok, according to data compiled by Bloomberg. The currency reached 33.61, the strongest level since August 2008. It has gained 3 per cent so far this year, the thirdbest performance among the region's 10 mosttraded currencies.
However, Usara warned that aside from US dollar, exporters and importers should also monitor the euro and yen, which have been much stronger over the past seven months. They are therefore recommended to cover their currency risk for these two currencies as well.
The US currency dropped to $1.4714 per euro as of 1.31pm in Tokyo, from $1.4680 the previous day in New York. It declined to 91.75 yen from 91.93 yen and weakened to $1.6237 per pound sterling from $1.6217. The yen was little changed at 135.01 versus the euro from 134.96.
Usara said the US dollar was likely to remain weak as greenback liquidity was still flooding the market, as with a threemonth LIBOR low for the dollar at lower than 0.3 per cent, it had become a carrytrade currency. Moreover, the market believes the greenback could continue to remain weak.
Today, the US Federal Open Market Committee will announce its stance on whether to maintain the quantitative easing or to announce an "exit plan". If easing is maintained, the dollar will continue weakening, she added.
Nitinai Sirismatthakarn, senior vice president, Research Group, SCB Securities, believes the baht will remain at around 33 per dollar or slightly weaker over the next three to four months.
He said the Bank of Thailand is expected to keep the baht level moving in tandem with the Kingdom's trading peers.
Last week, he said, the baht had weakened by 30 satang, which means the central bank intervened slightly more than other regional central banks had done in their currencies. Otherwise, the baht would have strengthened by 50 satang, he added.
The baht's value, Nitinai said, also depended more on capital inflows, which are expected to be significant but not as huge as in the past.
"It's just a dollar play," said Tetsuo Jerry Yoshikoshi, a senior economist with Sumitomo Mitsui Banking Corp in Singapore. "The Bank of Thailand has allowed the baht to strengthen a bit. Some traders must be convinced that the central bank is now more tolerant."
Sukit Udomsirikul, assistant managing director at Siam City Research Institute, said the baht was tending to appreciate to 33 to 32 per dollar on the back of the continuous capital inflow, which is likely to result in the SET Index reaching the 800-point mark.
However, he warned that if foreign investors' net buying on the stock market was Bt30 billion a month, it would be an alarming sign because such a level would indicate excessive cash flow.
Since the beginning of this month, foreign investors have bought Thai shares with a net amount of Bt18 billion.
Sukit voiced concern that the global economy, including Asia, could face a fresh round of economic bubble due to the flood of capital inflow to speculate in stock markets and currencies amid the trend of a weak US dollar.
Stock markets will drop sharply in the second quarter next year on anticipation that central banks will change to a hawkish mode by jacking up their policy rates. This is expected to be seen in the first quarter at the earliest following rising inflationary pressure, he said.
"The further the world travels along the road to economic recovery, the greater the amount of fund flows, particularly to the region, pushing up the baht. While appreciation of the baht favours industries with high import content, it harms export industries," SCB Securities said in a note released yesterday.
The brokerage said petroleum refineries and the motor vehicle and industrial machinery sectors would take advantage of the trend of a stronger baht.
However, the rubber products, rice and sugar sectors will experience difficulties.
Overseas investors bought US$549 million (Bt18.5 billion) more Thai equities than they sold this month through yesterday, while the SET Index of shares climbed 9 per cent in the same period.
Finance Minister Korn Chatikavanij said on September 18 that there was "no overt policy" for a targeted baht rate. The Dollar Index, which ICE uses to track the greenback against its six major trading partners, fell 0.3 per cent yesterday before the Federal Reserve met to set interest rates this week.
According to all 93 economists surveyed by Bloomberg News, the Fed will keep its target rate for overnight loans within a range of zero to 0.25 per cent at its twoday policy meeting.
AIG IMPROVING BUT MAY NEVER FULLY REPAY GOVT
Despite some progress, congressional investigators have cast doubt on whether efforst by American International Group (AIG) to restructure its operations and pay back the government will ever prove successful.
Still, the company's shares jumped about 15 per cent after the head of the House Committee on Oversight and Government Reform said the panel would examine a plan to reduce the AIG bailout package.
In the biggest taxpayer-funded bailout of a single company, the Federal Reserve and Treasury Department have provided $182.3 billion to the insurance giant. The Government Accountability Office (GAO) said that as of early September, AIG's outstanding balance of aid was US$120.7 billion (Bt4.05 trillion).
The GAO found "some progress in AIG's ability to repay the federal assistance". But improvement in the company's stability depends on its long-term health, market conditions and continued government support.
The report concluded that "the ultimate success of AIG's restructuring and repayment efforts remains uncertain".
Responding to the report, AIG spokesman Mark Herr said: "AIG remains committed to reducing risk and repaying taxpayers."
Fearing that AIG's collapse could take down the entire US financial system and the broader economy, the Fed first came to AIG's rescue last September.
The original $85-billion aid package came one day after Lehman Brothers filed for bankruptcy, the largest in US corporate history. AIG burned through the first lifeline, though, and continued to haemorrhage cash. It needed help three more times from the government, which owns about 80 per cent of the company because of the bailout.
Congressional investigators acknowledged that the federal assistance has "helped stabilisbe AIG's tance has "helped stabilisbe AIG's financial situation". But they said the government remains exposed to credit and investment risks that "could result in the Federal Reserve and Treasury not being repaid in full".
Representive Edolphus Towns, chairman of the House Oversight Committee, will have the panel study a plan by AIG's former CEO Maurice Greenberg to reduce and restructure the company's bailout package, a committee spokeswoman said on Monday.
Standard and Poor's equity analyst Chaterine Seifert upgraded her rating on AIG's stock to "Hold" from "Sell" on Monday, saying Towns' review of Greenberg's plan should boost the insurer's stock price in the near term.
Still, the company's shares jumped about 15 per cent after the head of the House Committee on Oversight and Government Reform said the panel would examine a plan to reduce the AIG bailout package.
In the biggest taxpayer-funded bailout of a single company, the Federal Reserve and Treasury Department have provided $182.3 billion to the insurance giant. The Government Accountability Office (GAO) said that as of early September, AIG's outstanding balance of aid was US$120.7 billion (Bt4.05 trillion).
The GAO found "some progress in AIG's ability to repay the federal assistance". But improvement in the company's stability depends on its long-term health, market conditions and continued government support.
The report concluded that "the ultimate success of AIG's restructuring and repayment efforts remains uncertain".
Responding to the report, AIG spokesman Mark Herr said: "AIG remains committed to reducing risk and repaying taxpayers."
Fearing that AIG's collapse could take down the entire US financial system and the broader economy, the Fed first came to AIG's rescue last September.
The original $85-billion aid package came one day after Lehman Brothers filed for bankruptcy, the largest in US corporate history. AIG burned through the first lifeline, though, and continued to haemorrhage cash. It needed help three more times from the government, which owns about 80 per cent of the company because of the bailout.
Congressional investigators acknowledged that the federal assistance has "helped stabilisbe AIG's tance has "helped stabilisbe AIG's financial situation". But they said the government remains exposed to credit and investment risks that "could result in the Federal Reserve and Treasury not being repaid in full".
Representive Edolphus Towns, chairman of the House Oversight Committee, will have the panel study a plan by AIG's former CEO Maurice Greenberg to reduce and restructure the company's bailout package, a committee spokeswoman said on Monday.
Standard and Poor's equity analyst Chaterine Seifert upgraded her rating on AIG's stock to "Hold" from "Sell" on Monday, saying Towns' review of Greenberg's plan should boost the insurer's stock price in the near term.
Thailand's economy on a roll, PM tells US
Thailand's economic recovery has begun,Prime Minister Abhisit Vejjajiva has told US investors.
The prime minister, who is in the US to attend the 64th Session of the United Nations General Assembly and the G-20 Pittsburgh Summit until Sunday, yesterday met with representatives of securities companies that trade in the US.
Mr Abhisit said he told executives the Stock Exchange of Thailand index had bounced back by almost 60% over the past nine months and the country's economic growth had turned positive.
He also told executives about the government's medium- and long-term plans to stimulate the economy under the "Thailand: Investing from Strength to Strength" scheme, particularly the water supply, communications and service sector projects.
This message sends the right signal to US investors and it should result in new investment in Thailand, Mr Abhisit said.
"Over the past several years, Thailand has had more economic competitors,but the country's infrastructure has been ignored over the past seven to eight years," he said.
"We only had a new airport."He said if Thailand did not invest in new infrastructure the country would lose its competitive advantage. The gov-ernment's clear development plan would boost investor confidence, he said.
Mr Abhisit said US executives asked about Thailand's political stability over the past few years.
He said he told them the government had a tangible plan for reconciliation which includes political reform.
"I believe foreign investors understand democracy, that people can view things differently ... the [United Front for Democracy against Dictatorship] rally that took place [on Saturday] and went well which should have positive effects on the country," he said.
Major US investors, including some of the world's top 10 investors, showed interest in the "Thailand: Investing from Strength to Strength" scheme as it would involve 140 billion baht in government spending, said Deputy Commerce Minister Alongkorn Ponlaboot who accompanied Mr Abhisit on the trip.
The prime minister told executives the worst point of Thailand's economic crisis had passed. All economic indices are showing signs of recovery.
The positive trend will revitalise ThaiUS business activities, Mr Alongkorn quoted Mr Abhisit as saying.
Mr Alongkorn said next year the volume of Thailand's exports to the US was expected to rise by 10%.
The prime minister, who is in the US to attend the 64th Session of the United Nations General Assembly and the G-20 Pittsburgh Summit until Sunday, yesterday met with representatives of securities companies that trade in the US.
Mr Abhisit said he told executives the Stock Exchange of Thailand index had bounced back by almost 60% over the past nine months and the country's economic growth had turned positive.
He also told executives about the government's medium- and long-term plans to stimulate the economy under the "Thailand: Investing from Strength to Strength" scheme, particularly the water supply, communications and service sector projects.
This message sends the right signal to US investors and it should result in new investment in Thailand, Mr Abhisit said.
"Over the past several years, Thailand has had more economic competitors,but the country's infrastructure has been ignored over the past seven to eight years," he said.
"We only had a new airport."He said if Thailand did not invest in new infrastructure the country would lose its competitive advantage. The gov-ernment's clear development plan would boost investor confidence, he said.
Mr Abhisit said US executives asked about Thailand's political stability over the past few years.
He said he told them the government had a tangible plan for reconciliation which includes political reform.
"I believe foreign investors understand democracy, that people can view things differently ... the [United Front for Democracy against Dictatorship] rally that took place [on Saturday] and went well which should have positive effects on the country," he said.
Major US investors, including some of the world's top 10 investors, showed interest in the "Thailand: Investing from Strength to Strength" scheme as it would involve 140 billion baht in government spending, said Deputy Commerce Minister Alongkorn Ponlaboot who accompanied Mr Abhisit on the trip.
The prime minister told executives the worst point of Thailand's economic crisis had passed. All economic indices are showing signs of recovery.
The positive trend will revitalise ThaiUS business activities, Mr Alongkorn quoted Mr Abhisit as saying.
Mr Alongkorn said next year the volume of Thailand's exports to the US was expected to rise by 10%.
Tuesday, September 22, 2009
Indorama plans delisting
Indorama Polymers, the SET-listed PET resin maker will seek delisting once its Indian-based parent company, Indorama Ventures (IVL), has completed acquiring it through a share swap option.
IVL will make an initial public offering of its new shares, make a tender offer for all shares of IRP held by other shareholders by swapping them with its new shares and subsequently delist IRP from the Stock Exchange of Thailand, according to the company's statement filed with the SET yesterday.
Existing IRP shareholders will become IVL shareholders through the process.
Under the restructuring plan, IVL share price is calculated by dividing the reference IRP share price of 14 baht per share by the swap ratio at one IRP share per 1.23 IVL shares.
For the swap ratio, IVL will calculate the ratio by dividing the reference IRP share price of 14 baht per share by the IPO price with a 3% discount.
The whole process should be finished by the end of October.
IRP now has 1.38 million shares. IVL,its major shareholder with 69.29%, conducts business through petrochemicalmaking subsidiaries.
The company's operations in 13 plants in five countries have increased significantly since 2003.
IRP shareholders will meet on the restructuring plan on Oct 26, with the share register to attend fixed on Oct 5.
Shares of IRP closed on the Stock Exchange of Thailand at 13.40 baht,up 90 satang, in trade worth 249.9 million baht.
IVL will make an initial public offering of its new shares, make a tender offer for all shares of IRP held by other shareholders by swapping them with its new shares and subsequently delist IRP from the Stock Exchange of Thailand, according to the company's statement filed with the SET yesterday.
Existing IRP shareholders will become IVL shareholders through the process.
Under the restructuring plan, IVL share price is calculated by dividing the reference IRP share price of 14 baht per share by the swap ratio at one IRP share per 1.23 IVL shares.
For the swap ratio, IVL will calculate the ratio by dividing the reference IRP share price of 14 baht per share by the IPO price with a 3% discount.
The whole process should be finished by the end of October.
IRP now has 1.38 million shares. IVL,its major shareholder with 69.29%, conducts business through petrochemicalmaking subsidiaries.
The company's operations in 13 plants in five countries have increased significantly since 2003.
IRP shareholders will meet on the restructuring plan on Oct 26, with the share register to attend fixed on Oct 5.
Shares of IRP closed on the Stock Exchange of Thailand at 13.40 baht,up 90 satang, in trade worth 249.9 million baht.
Britain's RBS mulls rights issue
Britain's Royal Bank of Scotland is considering approaching the market for extra money to avoid giving more control to the government - the second bank to mull such a move, reports said on Sunday.
RBS, which is 70 per cent owned by taxpayers after being bailed out in the global financial crisis, is preparing to join the government's insurance scheme for toxic assets, reports said, citing unnamed sources.
However, it is also considering a 3 billion pound to 4 billion pound (Bt164 billion to Bt219 billion) share issue to reduce the stake it would hand the government for joining its Asset protection Scheme.
RBS chief executive Stephen Hester is still "putting out feelers" about a "modest-sized" share issue, the Financial Times reported.
"RBS are looking to gauge investor appetite for a small, modest equity issue," a source was quoted saying.
RBS could put 325 billion pound worth of toxic assets into the scheme, which provides guarantees for risky assets, and would have to issue 19 billion pound of non-voting shares to the government as a fee, the newspaper said.
Raising fresh capital by issuing new shares could stop the government's share of the bank increasing from 70 per cent to a possible 84.5 per cent, the BBC said.
RBS, which is 70 per cent owned by taxpayers after being bailed out in the global financial crisis, is preparing to join the government's insurance scheme for toxic assets, reports said, citing unnamed sources.
However, it is also considering a 3 billion pound to 4 billion pound (Bt164 billion to Bt219 billion) share issue to reduce the stake it would hand the government for joining its Asset protection Scheme.
RBS chief executive Stephen Hester is still "putting out feelers" about a "modest-sized" share issue, the Financial Times reported.
"RBS are looking to gauge investor appetite for a small, modest equity issue," a source was quoted saying.
RBS could put 325 billion pound worth of toxic assets into the scheme, which provides guarantees for risky assets, and would have to issue 19 billion pound of non-voting shares to the government as a fee, the newspaper said.
Raising fresh capital by issuing new shares could stop the government's share of the bank increasing from 70 per cent to a possible 84.5 per cent, the BBC said.
PM, CHAOVARAT ACCUSED OF GRAFT
A Pheu Thai MP yesterday filed a complaint with National Anti-Corruption Commission against the Prime Minister and the Interior Minister for allowing conflict of interest, claiming the minister's family members hold shares in a construction company.
Pheu Thai Lamphun MP Sanguan Pongmanee and the party's spokesman Prompong Nopparit claimed a Cabinet resolution on March 10 approved a Bt408 million budget for additions to the Airport Link project. They said the wife and children of Interior Minister Chaovarat Chanweerakul hold shares in Sino-Thai Engineering and Construction, the company which won the contract.
He said Abhisit must also be responsible for the Cabinet resolution favouring Chaovarat's family.
"I ask the NACC to investigate Prime Minister Abhisit as the prime minister according to Article 171 that he must be directly related to (the case) just as (former prime minister) Thaksin (Shinawatra) was. The laws on country administration state clearly a prime minister must be responsible for all ministries," Sanguan said.
Thaksin was found guilty after his wife bought Ratchadaphisek land from the Financial Institutions Development Fund during his premiership. The law prohibits government officials and their spouses from contracting with an agency of which the official is in charge. Thaksin, as a prime minister, was considered also in charge of the FIDF.
Chaovarat, also Bhum Jai Thai Party leader, said he had declared his assets after many Cabinet reshuffles and did not conceal them. Also, he had had nothing to do with the company for a long time.
Moreover, he said, Sino-Thai was a public company in which anyone can buy shares; his children are mature persons according to the law and they could buy shares in any company.
Supachai Jaisamut, Bhum Jai Thai spokesman, said Chaovarat was planning to file a libel suit against Prompong related to the case.
Pheu Thai Lamphun MP Sanguan Pongmanee and the party's spokesman Prompong Nopparit claimed a Cabinet resolution on March 10 approved a Bt408 million budget for additions to the Airport Link project. They said the wife and children of Interior Minister Chaovarat Chanweerakul hold shares in Sino-Thai Engineering and Construction, the company which won the contract.
He said Abhisit must also be responsible for the Cabinet resolution favouring Chaovarat's family.
"I ask the NACC to investigate Prime Minister Abhisit as the prime minister according to Article 171 that he must be directly related to (the case) just as (former prime minister) Thaksin (Shinawatra) was. The laws on country administration state clearly a prime minister must be responsible for all ministries," Sanguan said.
Thaksin was found guilty after his wife bought Ratchadaphisek land from the Financial Institutions Development Fund during his premiership. The law prohibits government officials and their spouses from contracting with an agency of which the official is in charge. Thaksin, as a prime minister, was considered also in charge of the FIDF.
Chaovarat, also Bhum Jai Thai Party leader, said he had declared his assets after many Cabinet reshuffles and did not conceal them. Also, he had had nothing to do with the company for a long time.
Moreover, he said, Sino-Thai was a public company in which anyone can buy shares; his children are mature persons according to the law and they could buy shares in any company.
Supachai Jaisamut, Bhum Jai Thai spokesman, said Chaovarat was planning to file a libel suit against Prompong related to the case.
SET encourages automatic trading to boost liquidity
The SET hopes to encourage more institutional investors and brokers to use programme trading methods to help support market liquidity.
Algorithmic trading should become more popular in the future, said Sopawadee Lertmanaschai, chief marketing officer for markets and post-trade services at the Stock Exchange of Thailand.
"The SET supports algorithmic trading, as increasing liquidity is important to us. There is much potential for us to grow in using algorithmic trading," Mrs Sopawadee said.
"In 2008, such programs on the Singapore Stock Exchange accounted for 15%of the total value of trades; for the Korea Stock Exchange, the figure was 13.5%,for the Tokyo Stock Exchange, it was 9.3%, and for us, it was just 0.7%."
The SET began permitting algorithmic trading in 2006, and allows institutional investors to submit computer orders direct to broker trading systems through the direct market access system.
Trading strategies such as VWAP (volume weighted average price), TWAP (time weighted average price), TEX, Float,Close and MOC are currently permitted.SET officials said they were open to facilitating other types of trading methods.
Programme trading is common in developed Western markets and relies on computer models to calculate trading strategies including the timing, price and volume of different trades.
Brook Teeter, director and head of Advanced Executive Services Sales for Asia Pacific at Credit Suisse (Hong Kong),said algorithmic trading is an efficient tool for traders as they lend themselves anonymity which has less of an impact on the market.
Trades can be executed much faster than if human interaction is required,even while investors retain control over the overall strategy.
Mr Teeter said algorithms, however,do not take into account market news,whether good or bad.
"Human intervention is sometimes needed on highly volatile or widespread names," he told the Bangkok Post.Mr Teeter said 35% to 40% of Credit Suisse's trading flow in the Asia Pacific is executed through programme trading,considerably lower than the 65% to 70%seen in the US.
"In Thailand, we have seen some very good results with our VWAP tactic as approved to us by the Stock Exchange of Thailand," he said.
Algorithmic trading should become more popular in the future, said Sopawadee Lertmanaschai, chief marketing officer for markets and post-trade services at the Stock Exchange of Thailand.
"The SET supports algorithmic trading, as increasing liquidity is important to us. There is much potential for us to grow in using algorithmic trading," Mrs Sopawadee said.
"In 2008, such programs on the Singapore Stock Exchange accounted for 15%of the total value of trades; for the Korea Stock Exchange, the figure was 13.5%,for the Tokyo Stock Exchange, it was 9.3%, and for us, it was just 0.7%."
The SET began permitting algorithmic trading in 2006, and allows institutional investors to submit computer orders direct to broker trading systems through the direct market access system.
Trading strategies such as VWAP (volume weighted average price), TWAP (time weighted average price), TEX, Float,Close and MOC are currently permitted.SET officials said they were open to facilitating other types of trading methods.
Programme trading is common in developed Western markets and relies on computer models to calculate trading strategies including the timing, price and volume of different trades.
Brook Teeter, director and head of Advanced Executive Services Sales for Asia Pacific at Credit Suisse (Hong Kong),said algorithmic trading is an efficient tool for traders as they lend themselves anonymity which has less of an impact on the market.
Trades can be executed much faster than if human interaction is required,even while investors retain control over the overall strategy.
Mr Teeter said algorithms, however,do not take into account market news,whether good or bad.
"Human intervention is sometimes needed on highly volatile or widespread names," he told the Bangkok Post.Mr Teeter said 35% to 40% of Credit Suisse's trading flow in the Asia Pacific is executed through programme trading,considerably lower than the 65% to 70%seen in the US.
"In Thailand, we have seen some very good results with our VWAP tactic as approved to us by the Stock Exchange of Thailand," he said.
MANY STOCKS FAIL TO REACH TARGET PRICE AMID RALLY
The Thai stock market has rallied around 57 per cent so far this year on the back of a capital inflow into Asian stock markets - particularly emerging markets - and signs of a global economic turnaround.
Investors worried if now is a good time to buy stocks, given the recent sharp rise in the stock index, may find it beneficial to take a look at securities analysts' research and compare current prices with the fair value estimates of brokerage houses.
Research papers and price targets for stocks gathered by the Securities Analysts Association (SAA) can be found at www.setrade.com.
Despite the strong gain in Thai shares, due mainly to a buying spree in big market cap stocks, prices of 53 stocks listed on the SET100 Index as of last Thursday were below average target prices, according to the SAA.
More interestingly, the prices of as many as 17 stocks were at least 10 per cent lower than the average target prices.
Bangchak Petroleum's closing share price on September 17 of Bt14.30 was 21.04 per cent below the average target price of Bt18.11.
The market price of the oil refiner not only failed to meet the highest target price compiled by the SAA - Bt21, as set by United Securities - it even lagged behind the lowest target price, forecasted by Trinity Securities at Bt15.50.
All all eight brokers quoted by the SAA recommended "buy" for the stock.
Trinity Securities said in its research paper that Bangchak's Product Quality Improvement (PQI) programme, which is aimed at raising the production capacity of high-margin products including diesel, would commercially commend late this quarter, with the cyclical upturn in the diesel price.
Under the PQI, diesel production will increase to 46 per cent of Bangchak's total production from 35 per cent.
Moreover, Bangchak plans to raise its refining capacity to 100,000 barrels per day (b/d) in the fourth quarter from 90,000 b/d at present.
Trinity estimates that Bangchak's diesel-price hedging, equivalent to 40 per cent of the refining output, will help the company gain at least Bt1.5 billion in the third and fourth quarters.
As a result, it has raised its 2009 net profit estimate by 49 per cent to Bt7.37 billion from Bt4.95 billion.
It also predicted that Bangchak would pay an interim dividend of Bt1 per share for its second-half performance.
"If [investors] are concerned about risk, they can buy BCP-DR1 [Bangkok Petroleum-Depository Receipt1] instead.... It has a minimum guarantee from the Finance Ministry at Bt13, while the securities-holders enjoy the same privilegs as those who hold Bangchak stock," the paper stated.
Siamgas and Petrochemicals had upside gain of 20.19 per cent on an average target price among those quoted by SAA of Bt1.40.
KT Zeamico Securities was the only broker quoted by SAA that conducted research on SGP. It recommended "buy" for the stock.
Bumrungrad Hospital's share price was 16.37 per cent lower than the average target price in the SAA consensus at Bt30.49. However, its price has already exceeded the lowest target price range at Bt21 estimated by Thanachart Securities.
In the consensus, 10 brokers issued research papers for the hospital operator. Of those, eight recommended "buy", while one recommended "neutral" and one "sell".
Apart from BH, Bangkok Chain Hospital and Dusit Medical Services had upside gain from their average target prices.
KH's share price as of last Thursday was almost 14 per cent lower than the average target price of Bt9.93. It was 29.34 per cent lower than the highest target price of Bt12.1 but 0.59 per cent higher than the lowest target price of Bt8.50.
BGH has upside gain of 11.60 per cent from the average target price in the consensus of Bt27.15.
Among PTT's subsidiaries, PTT Exploration and Production (PTTEP) offered the second-highest upside gain after Bangchak.
The petroleum-exploration firm's share price was 11.90 per cent lower than the average target price of Bt165.72.
Thanachart Securities was the most pessimistic among the 15 brokers in the consensus. It recommended a "reduce" rating for PTTEP's stock with a target price of Bt105, far below the closing price last Thursday of Bt146.
Kasikorn Securities was the most optimistie on the stock with a target price of Bt194, a 24.74 per cent upside gain.
PTT itself had 8.52 per cent upside gain from the average target price of Bt289.68.
Sixteen of the 17 research houses in the consensus recommended "buy" the stock, while only one, BFIT Securities, recommended "hold".
Thai Oil offered 3.56 per cent upside gain from the average target price of Bt47.44.
Share prices of IRPC, PTT Chemical and PTT Aromatics and Refining exceeded the average target prices of 5.39 per cent, 13.77 per cent and 7.83 per cent, respectively.
IRPC, PTT Chemical and PTT Aromatics and Refining average target prices are Bt4.08, Bt70.54 and Bt23.88, respectively.
Share prices of 40 stocks listed on the SET100 Index were higher than the average target prices.
Of the total, 15 stocks were at least 10 percent higher than the average target prices.
Amata Corp, Thailand's largest industrial developer, exceeded the average price of Bt6.60 by 36.36 per cent.
Five of the nine brokers in the consensus, however, recommended "buy" the stock, one recommended "hold" and the rest recommended "sell".
True Corp's share price as of last Thursday exceeded the average target price of Bt2.49 by 27.71 per cent.
Kiatnakin Bank's price was 25.42 per cent higher than the average target price of Bt17.70.
Among the 100 securities in the consensus, seven are not covered by any brokers. These are GJ Steel, International Engineering, Loxley, Mill Con Steel Industries, Sabina, TWZ Corp and Tanayong.
Bangchak Petroleum's closing share price on September 17 of Bt14.30 was 21.04 per cent below the average target price of Bt18.11.
PTT itself had 8.52 per cent upside gain from the average target price of Bt289.68. Sixteen of the 17 research houses in the consensus recommended "buy" the stock, while only one recommended "hold".
Investors worried if now is a good time to buy stocks, given the recent sharp rise in the stock index, may find it beneficial to take a look at securities analysts' research and compare current prices with the fair value estimates of brokerage houses.
Research papers and price targets for stocks gathered by the Securities Analysts Association (SAA) can be found at www.setrade.com.
Despite the strong gain in Thai shares, due mainly to a buying spree in big market cap stocks, prices of 53 stocks listed on the SET100 Index as of last Thursday were below average target prices, according to the SAA.
More interestingly, the prices of as many as 17 stocks were at least 10 per cent lower than the average target prices.
Bangchak Petroleum's closing share price on September 17 of Bt14.30 was 21.04 per cent below the average target price of Bt18.11.
The market price of the oil refiner not only failed to meet the highest target price compiled by the SAA - Bt21, as set by United Securities - it even lagged behind the lowest target price, forecasted by Trinity Securities at Bt15.50.
All all eight brokers quoted by the SAA recommended "buy" for the stock.
Trinity Securities said in its research paper that Bangchak's Product Quality Improvement (PQI) programme, which is aimed at raising the production capacity of high-margin products including diesel, would commercially commend late this quarter, with the cyclical upturn in the diesel price.
Under the PQI, diesel production will increase to 46 per cent of Bangchak's total production from 35 per cent.
Moreover, Bangchak plans to raise its refining capacity to 100,000 barrels per day (b/d) in the fourth quarter from 90,000 b/d at present.
Trinity estimates that Bangchak's diesel-price hedging, equivalent to 40 per cent of the refining output, will help the company gain at least Bt1.5 billion in the third and fourth quarters.
As a result, it has raised its 2009 net profit estimate by 49 per cent to Bt7.37 billion from Bt4.95 billion.
It also predicted that Bangchak would pay an interim dividend of Bt1 per share for its second-half performance.
"If [investors] are concerned about risk, they can buy BCP-DR1 [Bangkok Petroleum-Depository Receipt1] instead.... It has a minimum guarantee from the Finance Ministry at Bt13, while the securities-holders enjoy the same privilegs as those who hold Bangchak stock," the paper stated.
Siamgas and Petrochemicals had upside gain of 20.19 per cent on an average target price among those quoted by SAA of Bt1.40.
KT Zeamico Securities was the only broker quoted by SAA that conducted research on SGP. It recommended "buy" for the stock.
Bumrungrad Hospital's share price was 16.37 per cent lower than the average target price in the SAA consensus at Bt30.49. However, its price has already exceeded the lowest target price range at Bt21 estimated by Thanachart Securities.
In the consensus, 10 brokers issued research papers for the hospital operator. Of those, eight recommended "buy", while one recommended "neutral" and one "sell".
Apart from BH, Bangkok Chain Hospital and Dusit Medical Services had upside gain from their average target prices.
KH's share price as of last Thursday was almost 14 per cent lower than the average target price of Bt9.93. It was 29.34 per cent lower than the highest target price of Bt12.1 but 0.59 per cent higher than the lowest target price of Bt8.50.
BGH has upside gain of 11.60 per cent from the average target price in the consensus of Bt27.15.
Among PTT's subsidiaries, PTT Exploration and Production (PTTEP) offered the second-highest upside gain after Bangchak.
The petroleum-exploration firm's share price was 11.90 per cent lower than the average target price of Bt165.72.
Thanachart Securities was the most pessimistic among the 15 brokers in the consensus. It recommended a "reduce" rating for PTTEP's stock with a target price of Bt105, far below the closing price last Thursday of Bt146.
Kasikorn Securities was the most optimistie on the stock with a target price of Bt194, a 24.74 per cent upside gain.
PTT itself had 8.52 per cent upside gain from the average target price of Bt289.68.
Sixteen of the 17 research houses in the consensus recommended "buy" the stock, while only one, BFIT Securities, recommended "hold".
Thai Oil offered 3.56 per cent upside gain from the average target price of Bt47.44.
Share prices of IRPC, PTT Chemical and PTT Aromatics and Refining exceeded the average target prices of 5.39 per cent, 13.77 per cent and 7.83 per cent, respectively.
IRPC, PTT Chemical and PTT Aromatics and Refining average target prices are Bt4.08, Bt70.54 and Bt23.88, respectively.
Share prices of 40 stocks listed on the SET100 Index were higher than the average target prices.
Of the total, 15 stocks were at least 10 percent higher than the average target prices.
Amata Corp, Thailand's largest industrial developer, exceeded the average price of Bt6.60 by 36.36 per cent.
Five of the nine brokers in the consensus, however, recommended "buy" the stock, one recommended "hold" and the rest recommended "sell".
True Corp's share price as of last Thursday exceeded the average target price of Bt2.49 by 27.71 per cent.
Kiatnakin Bank's price was 25.42 per cent higher than the average target price of Bt17.70.
Among the 100 securities in the consensus, seven are not covered by any brokers. These are GJ Steel, International Engineering, Loxley, Mill Con Steel Industries, Sabina, TWZ Corp and Tanayong.
Bangchak Petroleum's closing share price on September 17 of Bt14.30 was 21.04 per cent below the average target price of Bt18.11.
PTT itself had 8.52 per cent upside gain from the average target price of Bt289.68. Sixteen of the 17 research houses in the consensus recommended "buy" the stock, while only one recommended "hold".
Further gains for New York stocks hinge on Fed and data
US stocks could extend their rally and the Dow industrials may climb above 10,000, should Federal Reserve policymakers and economic data support the view that the US economy is recovering from recession.
The Federal Open Market Committee will meet tomorrow and Wednesday,when investors will anxiously await central bankers' assessment of whether the economy is improving.
The week's key economic data will include existing home sales, new orders of durable goods such as washing machines and refrigerators, new home sales and a final reading for September on consumer sentiment - all likely to put the expectations for recovery to the test.
The Standard & Poor's 500 Index has staged a six-month climb from a 12-year closing low, rising 58%. The rally has fed on expectations of a rebound from recession coupled with cheap money that has flooded most markets.
"The market has obviously had a nice run with a combination of hopes for second-half recovery and a very easy Fed policy," said Peter Boockvar, equity strategist at Miller Tabak in New York.
The Fed this week is expected to acknowledge recent economic data pointing to a fledgling recovery. The FOMC statement, due at 1:15 am Thursday Thailand time, will come a week after Fed chairman Ben Bernanke said the US recession was "very likely" over. But he also said recovery would be slow and it would take time to create new jobs.
"We're seeing investors who were really direly pessimistic move the meter to slightly more optimistic, and that is confirmed with each little piece of economic data," said Fred Dickson of D.A. Davidson & Co in Lake Oswego, Oregon.
That optimism has translated into an extension of the rally in stocks. In the week to Friday, the Dow advanced 2.24%to 9,820.20, its highest level in 11 months.The Nasdaq rose 2.5% to 2,132.82 while the S&P gained 2.45% to 1,068.30.
The 50% gain for the Dow since March represents the best six-month rally for the blue-chip index since 1933, according to finance professor Mark Perry at the University of Michigan.
Investors are wondering, though, how long interest rates will remain at record lows and whether the economic recovery will remain on track.
"We get both those questions answered partially next week," Mr Boockvar said, referring to the Fed meeting and key data including leading economic indicators and durable goods.
Central banks around the world have begun debating how, and more importantly when, to phase out the emergency steps taken to contain the worst global financial crisis in decades. Most are not expected to do so until well into 2010.
The Fed has already announced it's going to halt the purchases of Treasuries,Mr Boockvar said."The real exit strategy is [normalising] the Fed funds rate, and they are not close to doing that."
A Reuters poll released last Wednesday showed economists expect the Fed to hold rates steady until the third quarter of next year. It also showed expectations the US economy will make a more robust recovery from recession than expected a month ago.
Central banks' strategies also will be part of the discussion during a two-day G20 summit in Pittsburgh, starting on Thursday. Bankers' pay and other financial regulations will also be examined.
On the macro front, August durable goods orders, due for release on Friday,are forecast to rise 0.5%.
"People are looking for validation (of the improved sentiment) in the durable goods data," said John Praveen, chief investment strategist at Prudential International Investments Advisers.
Sales of existing or used homes, due on Thursday, are expected to show a rise to an annual rate of 5.35 million units in August, from July's rate of 5.24 million. August new-home sales are expected to increase to an annual rate of 440,000 from 433,000 in July.
The Federal Open Market Committee will meet tomorrow and Wednesday,when investors will anxiously await central bankers' assessment of whether the economy is improving.
The week's key economic data will include existing home sales, new orders of durable goods such as washing machines and refrigerators, new home sales and a final reading for September on consumer sentiment - all likely to put the expectations for recovery to the test.
The Standard & Poor's 500 Index has staged a six-month climb from a 12-year closing low, rising 58%. The rally has fed on expectations of a rebound from recession coupled with cheap money that has flooded most markets.
"The market has obviously had a nice run with a combination of hopes for second-half recovery and a very easy Fed policy," said Peter Boockvar, equity strategist at Miller Tabak in New York.
The Fed this week is expected to acknowledge recent economic data pointing to a fledgling recovery. The FOMC statement, due at 1:15 am Thursday Thailand time, will come a week after Fed chairman Ben Bernanke said the US recession was "very likely" over. But he also said recovery would be slow and it would take time to create new jobs.
"We're seeing investors who were really direly pessimistic move the meter to slightly more optimistic, and that is confirmed with each little piece of economic data," said Fred Dickson of D.A. Davidson & Co in Lake Oswego, Oregon.
That optimism has translated into an extension of the rally in stocks. In the week to Friday, the Dow advanced 2.24%to 9,820.20, its highest level in 11 months.The Nasdaq rose 2.5% to 2,132.82 while the S&P gained 2.45% to 1,068.30.
The 50% gain for the Dow since March represents the best six-month rally for the blue-chip index since 1933, according to finance professor Mark Perry at the University of Michigan.
Investors are wondering, though, how long interest rates will remain at record lows and whether the economic recovery will remain on track.
"We get both those questions answered partially next week," Mr Boockvar said, referring to the Fed meeting and key data including leading economic indicators and durable goods.
Central banks around the world have begun debating how, and more importantly when, to phase out the emergency steps taken to contain the worst global financial crisis in decades. Most are not expected to do so until well into 2010.
The Fed has already announced it's going to halt the purchases of Treasuries,Mr Boockvar said."The real exit strategy is [normalising] the Fed funds rate, and they are not close to doing that."
A Reuters poll released last Wednesday showed economists expect the Fed to hold rates steady until the third quarter of next year. It also showed expectations the US economy will make a more robust recovery from recession than expected a month ago.
Central banks' strategies also will be part of the discussion during a two-day G20 summit in Pittsburgh, starting on Thursday. Bankers' pay and other financial regulations will also be examined.
On the macro front, August durable goods orders, due for release on Friday,are forecast to rise 0.5%.
"People are looking for validation (of the improved sentiment) in the durable goods data," said John Praveen, chief investment strategist at Prudential International Investments Advisers.
Sales of existing or used homes, due on Thursday, are expected to show a rise to an annual rate of 5.35 million units in August, from July's rate of 5.24 million. August new-home sales are expected to increase to an annual rate of 440,000 from 433,000 in July.
SET50 KEEPS PACE WITH WORLD
The stock Exchange of Thailand 50 Index last week edged up 2.65 points, or 0.52 per cent, to 510.85 points, while the SET 50 Index futures, with S50U09, with the nearest maturity expiring at the end of this month, rose 2.90 points, or 0.57 per cent, to 511.6 points.
Stock markets around the world last week increased from the previous week. The Dow Jones Industrial Average set the year's record to close at 9,791.71 points on the back of the higher production figure in August,an increase for two straight months, the three-year high of US retail sales, and fed Reserve Chairman Ben Bernanke's speech that the recession is likely over.
The positive factors enhanced investors' confidence.
The SET index last week also climbed up from the previous week. Energy stocks were the most active. Some investors, however, stayed on the sideline in latje last week to see the outcome of the red-shirt rally stagfed on Saturday.
Average dailfutures trading was 10,652 contracts, down by 3,413. Open interest contracts as of last Thursday numbered 53,693, up 2,496 from the previous week.
Total weekly futures trading contracts numbered 53,259 worth a combined Bt25.21 billion, Of these, 42,625 were for SET 50 Index futures, 3,710 were for single-stock futures, 4,324 were for gold futures and 2,600 were for SET 50 Index options.
Stock markets around the world last week increased from the previous week. The Dow Jones Industrial Average set the year's record to close at 9,791.71 points on the back of the higher production figure in August,an increase for two straight months, the three-year high of US retail sales, and fed Reserve Chairman Ben Bernanke's speech that the recession is likely over.
The positive factors enhanced investors' confidence.
The SET index last week also climbed up from the previous week. Energy stocks were the most active. Some investors, however, stayed on the sideline in latje last week to see the outcome of the red-shirt rally stagfed on Saturday.
Average dailfutures trading was 10,652 contracts, down by 3,413. Open interest contracts as of last Thursday numbered 53,693, up 2,496 from the previous week.
Total weekly futures trading contracts numbered 53,259 worth a combined Bt25.21 billion, Of these, 42,625 were for SET 50 Index futures, 3,710 were for single-stock futures, 4,324 were for gold futures and 2,600 were for SET 50 Index options.
RECOVERY GIVES INVESTORS MORE OPPORTUNITY
Investors cn learn a lot from history. Looking back at the first quarter of 2009, many investors fretting about the oweful state of the global economy failed to focus on the things that matter: valuation and rapid acceleration of global policy momentum. As it turned out, these very factors created the backdrop for the sharp global equity rally over the past six months.
Given the heights that world equity prices have reached,investors are unsurprisingly getting wary. Admittedly, the valuation case has weakened. But global policy effectiveness has not waned.Rather,it is shifting from not waned. Rather,it is shifting from the China-led successes of the firt half of 2009 to a broader story, with US policy achievements emerging recently.
This leaves the prospect for another leg in the global rally, driven by continued momentum in US economic and earnings data.
For the year to date, economic recovery momentum has been key to identifying out-performing markets. Earlier in the year,news of US and Chinese economic stuimulus set the stage for a bottoming in global markets. But with Chinese stimulus coming sooner and more aggres-sively, MSCI [formerly Morgan Stanley Capital International] China surged 35 per cent in the first half of 2009, outpacing MSCI World's meagre 5 per cent.
But as Chinese policy stabilises, Wadhington's efforts during the late first quarter of 2009 are starting to ramp up US growth momentum. This can be seen in the rapid expansion of the Institute of Supply Management's New Orders Index in July and again in August. The index suggests that US job market concerns may start to be addressed soon, providing further support to earnings reports due next month (September).
Since March 2009, US company profits have been a key driver of market performance. During the first quarter 2009 earnings season from April to mid-May, world equities surged 18 per cent. Similarly, stocks rallied 12 per cent in the next earning season from July to mid-August. In total, on a compounded basis, earnings season-rallies have accounted for nearly two-thirds of the 52 per cent rise in globa equities(through August results next month, Tobias Levkovich, Citi's US equity strategist, believes earnings expectation upgrades could continur into the fall, potentially catalysing the next leg of the rally.
The starting of the transition of global recovery from one drive solely by China to a more balanced US/Chkina model has led to US equities bginning to outperform Chinese stocks sincke mid-year. MSCI US rose 11.5 per cent (through August 21),exceeding a 5.7 per cent increase in MSCI China.
So while investors are understandably cautiou expected news flow sugests caution will not be rewarded in the coming months. Asian stocks are likely to pariticipate again in the next upswing. However, they may not lead as they did in the first half of 2009. Rather, US equities, which wrelatively lacklus tre early this year, may sparkle.
But the US recovery, while appearing increasingly entrenchd, is still expected to be moderate. Hence, identifying stocks that currently under-prece even the modest recovery expescted, is crucial in the next stage of the rally.
Despite our optimism, we admit the global recovery story for 2010 must strengthen further to sustain the rally. China,already grappling with rapid loan growth, must moderate its aggressive easing policy and continue to build a domestic consumer base. As for the Us,it needs to transition from a stimulus-led recovery to a private sector-driven demand story.
On balance, while concerns exist on the horizon, upcoming news flow is expected to show US and global recovery acelerating, leaving the balance between risk and reward in favour of the reward camp through yar-end, creating an opportunity for invetors to broaden their focus from the past winners of emerging markets to include the opportunities in the US.
NORMAN VILLAMIN is head of investment analysis and advice,wealth management, Asia-Pacific,Citi.
Given the heights that world equity prices have reached,investors are unsurprisingly getting wary. Admittedly, the valuation case has weakened. But global policy effectiveness has not waned.Rather,it is shifting from not waned. Rather,it is shifting from the China-led successes of the firt half of 2009 to a broader story, with US policy achievements emerging recently.
This leaves the prospect for another leg in the global rally, driven by continued momentum in US economic and earnings data.
For the year to date, economic recovery momentum has been key to identifying out-performing markets. Earlier in the year,news of US and Chinese economic stuimulus set the stage for a bottoming in global markets. But with Chinese stimulus coming sooner and more aggres-sively, MSCI [formerly Morgan Stanley Capital International] China surged 35 per cent in the first half of 2009, outpacing MSCI World's meagre 5 per cent.
But as Chinese policy stabilises, Wadhington's efforts during the late first quarter of 2009 are starting to ramp up US growth momentum. This can be seen in the rapid expansion of the Institute of Supply Management's New Orders Index in July and again in August. The index suggests that US job market concerns may start to be addressed soon, providing further support to earnings reports due next month (September).
Since March 2009, US company profits have been a key driver of market performance. During the first quarter 2009 earnings season from April to mid-May, world equities surged 18 per cent. Similarly, stocks rallied 12 per cent in the next earning season from July to mid-August. In total, on a compounded basis, earnings season-rallies have accounted for nearly two-thirds of the 52 per cent rise in globa equities(through August results next month, Tobias Levkovich, Citi's US equity strategist, believes earnings expectation upgrades could continur into the fall, potentially catalysing the next leg of the rally.
The starting of the transition of global recovery from one drive solely by China to a more balanced US/Chkina model has led to US equities bginning to outperform Chinese stocks sincke mid-year. MSCI US rose 11.5 per cent (through August 21),exceeding a 5.7 per cent increase in MSCI China.
So while investors are understandably cautiou expected news flow sugests caution will not be rewarded in the coming months. Asian stocks are likely to pariticipate again in the next upswing. However, they may not lead as they did in the first half of 2009. Rather, US equities, which wrelatively lacklus tre early this year, may sparkle.
But the US recovery, while appearing increasingly entrenchd, is still expected to be moderate. Hence, identifying stocks that currently under-prece even the modest recovery expescted, is crucial in the next stage of the rally.
Despite our optimism, we admit the global recovery story for 2010 must strengthen further to sustain the rally. China,already grappling with rapid loan growth, must moderate its aggressive easing policy and continue to build a domestic consumer base. As for the Us,it needs to transition from a stimulus-led recovery to a private sector-driven demand story.
On balance, while concerns exist on the horizon, upcoming news flow is expected to show US and global recovery acelerating, leaving the balance between risk and reward in favour of the reward camp through yar-end, creating an opportunity for invetors to broaden their focus from the past winners of emerging markets to include the opportunities in the US.
NORMAN VILLAMIN is head of investment analysis and advice,wealth management, Asia-Pacific,Citi.
MARKET LIKELY TO SEE A SHORT-TERM CORRECTION
Assistant managing director, Siam City Research Institute
We believe the Stock Exchange of Thailand (SET) Index is likely to correct in the shortterm before any further rally.
However, the index already exceeds its fundamental level for 2009.
Sitting as it is now above 700, the index is more sensitive to negative factors, because returns are lower than 5 per cent, and the earning-yield gap between five-year bonds and stocks has dropped below 4 er cent. This will lead some investors t shift from equities into bonds or cash. The dollar's weakness poses a short-term risk. However,its potential gains remain limited by the current weak economic conditions in the US. The dollar is likely to weaken further to $1.50 per euro.
The key factors affecting the stock index this week are the following: The G-20 meeting is expected to have a positive impact overall on investment; the US Fed meeting on Wednesday is likely to maintain its ultra-low interest rates; and, at home, reaction to the weekend's red-shirt protest will be a factor.
Thus, this week we recommended reducing investment portfolios and shifting to domestic plays. We recommend Ch Karnchang, Tipco Asphalt, Dynasty Ceramic, Siam Cement, Tata Steel (Thailand),Central Pattana, Siam Makro,Quality Houses and Preuksa Real Estate.
THERDSAK THAVEETHEERATHAM,
Senior vice president, Asia Plus Securities
The SET index rally over the past Kavee month had two main causes. First, investors saw a large upside compared to fair value.
We believe market earnings per share growth next year will be 16 per cent.
Second, significant foreign-fund inflows have returned to the Thai market.
From early this month, accumulated net buying by foreign investors was Bt18.3 billion. Since March this year, accumulated net buying by foreigners has totalled Bt58.2 billion.
In the past, a correction has usually occurred whenever net foreign buying reched Bt30 billion. Thus,712-717 points will be a level of short-term key resistance for the SET Index.
We recommend turnaround stocks including AAPICO Hitech wit fair value of Bt11.34, Tipco Asphalt with fair value of Bt27, and Krung Thai Bank with fair value of Bt11.60.
KAVEE CHUKITKASEM,
Assistant managing director, Kasikorn Skecurities
Over the past week, the SET index tested 720 as expected. Foreign investors played a key role by continuing to buy energy stocks. Oil prices rose above US$70 (Bt2,358) a barrel again last week.
In addition, investors turned to speculate on construction and construction materials firms,as well as land developers, as these have all benefited from the government's Thai Khemkhaeng scheme and masstransit projects.
Hedge funds also shifted from dollar-denominated assets to other assets, including Asian stocks. The baht is likely tostrengthen further over the remainder of the year.
The Thai currency has been boosted by improvements on the export front. Exports contracted only 18 per cent in August, compared to a fall of 26 per cent the previous month.
However, despite the recent rally, we still believe the SET still has we still believe the SET still has upside momentum, as capital inflows continue. The index is expected to test 730-135 this week,led by the energy,banking and property sectors.
Thus,investors still have room to speculate. We recommend Bangkok Bank, PTT Exploration and Production, Land and Houses, Ch Karnchang and ticon Industrial Connection. However, with the SET Index at its current level, we expect a correction over the next one to two weeks.
The correction won't be strong-likely limited to 5-8 per cent. We believe corporate fearnings will stay positive until the first quarter of next year.
Thus, medium-term investors don't need to sell stocks. We still recommend overweight for BBL,PTTEP, Central Plaza Hotel, Bumrungrad Hospital, Advanced Info Service, CP All, Charoen Pokphand Foods and GMM Grammy.
We believe the Stock Exchange of Thailand (SET) Index is likely to correct in the shortterm before any further rally.
However, the index already exceeds its fundamental level for 2009.
Sitting as it is now above 700, the index is more sensitive to negative factors, because returns are lower than 5 per cent, and the earning-yield gap between five-year bonds and stocks has dropped below 4 er cent. This will lead some investors t shift from equities into bonds or cash. The dollar's weakness poses a short-term risk. However,its potential gains remain limited by the current weak economic conditions in the US. The dollar is likely to weaken further to $1.50 per euro.
The key factors affecting the stock index this week are the following: The G-20 meeting is expected to have a positive impact overall on investment; the US Fed meeting on Wednesday is likely to maintain its ultra-low interest rates; and, at home, reaction to the weekend's red-shirt protest will be a factor.
Thus, this week we recommended reducing investment portfolios and shifting to domestic plays. We recommend Ch Karnchang, Tipco Asphalt, Dynasty Ceramic, Siam Cement, Tata Steel (Thailand),Central Pattana, Siam Makro,Quality Houses and Preuksa Real Estate.
THERDSAK THAVEETHEERATHAM,
Senior vice president, Asia Plus Securities
The SET index rally over the past Kavee month had two main causes. First, investors saw a large upside compared to fair value.
We believe market earnings per share growth next year will be 16 per cent.
Second, significant foreign-fund inflows have returned to the Thai market.
From early this month, accumulated net buying by foreign investors was Bt18.3 billion. Since March this year, accumulated net buying by foreigners has totalled Bt58.2 billion.
In the past, a correction has usually occurred whenever net foreign buying reched Bt30 billion. Thus,712-717 points will be a level of short-term key resistance for the SET Index.
We recommend turnaround stocks including AAPICO Hitech wit fair value of Bt11.34, Tipco Asphalt with fair value of Bt27, and Krung Thai Bank with fair value of Bt11.60.
KAVEE CHUKITKASEM,
Assistant managing director, Kasikorn Skecurities
Over the past week, the SET index tested 720 as expected. Foreign investors played a key role by continuing to buy energy stocks. Oil prices rose above US$70 (Bt2,358) a barrel again last week.
In addition, investors turned to speculate on construction and construction materials firms,as well as land developers, as these have all benefited from the government's Thai Khemkhaeng scheme and masstransit projects.
Hedge funds also shifted from dollar-denominated assets to other assets, including Asian stocks. The baht is likely tostrengthen further over the remainder of the year.
The Thai currency has been boosted by improvements on the export front. Exports contracted only 18 per cent in August, compared to a fall of 26 per cent the previous month.
However, despite the recent rally, we still believe the SET still has we still believe the SET still has upside momentum, as capital inflows continue. The index is expected to test 730-135 this week,led by the energy,banking and property sectors.
Thus,investors still have room to speculate. We recommend Bangkok Bank, PTT Exploration and Production, Land and Houses, Ch Karnchang and ticon Industrial Connection. However, with the SET Index at its current level, we expect a correction over the next one to two weeks.
The correction won't be strong-likely limited to 5-8 per cent. We believe corporate fearnings will stay positive until the first quarter of next year.
Thus, medium-term investors don't need to sell stocks. We still recommend overweight for BBL,PTTEP, Central Plaza Hotel, Bumrungrad Hospital, Advanced Info Service, CP All, Charoen Pokphand Foods and GMM Grammy.
Sunday, September 20, 2009
Dow hits new 11-month high as builders advance
US stocks rose on Friday as Procter & Gamble and major home builders advanced on positive brokerage comments and investors bet the economic recovery will be strong enough to sustain corporate profits.
The Dow hit a new 11-month high and capped its best week in two months as Citigroup said Procter & Gamble,maker of Tide detergent and Pampers,is poised to win market share through aggressive pricing.
Procter & Gamble's shares rose 3.2%to $57.32. The S&P consumer staples index, up 1.1%, was among the S&P 500's best-performing sectors.
"It's sort of cautious optimism. What that's doing is leading to analyst upgrades, and we're seeing analysts raising earnings estimates for both this year and for calendar 2010 fairly consistently,"said Fred Dickson, market strategist at DA Davidson & Co in Lake Oswego,Oregon.
The S&P 500 is up 58% since hitting a 12-year closing low in early March,partly because of strong second-quarter earnings and optimism that an economic recovery is gaining traction.
Home builders Toll Brothers and KB Home both were upgraded by JP Morgan Securities, which said the housing sector will continue to recover over the next 24 months and drive the current rally in home builders' stocks.
The Dow Jones industrial average was up 36.28 points, or 0.37%, at 9,820.20.The Standard & Poor's 500 Index was up 2.81 points, or 0.26%, at 1,068.30 while the Nasdaq Composite Index was up 6.11 points, or 0.29%, at 2,132.86.
It was the market's second-straight week of gains. Last week, the Dow rose 2.24%, the S&P 500 gained 2.45% and the Nasdaq advanced 2.50%.
"Quadruple witching," the expiration and settlement of four different types of September equity futures and options contracts, seemed "fairly quiet". Mr Dickson said, though the event sometimes leads to increased volatility.
Oil company Chevron Corp also was upgraded.
Credit Suisse said Chevron looks best equipped of the major oil companies to deliver growth "over the coming cycle to 2020". The stock rose 0.9% to $72.64.
Toll Brothers shares rose 3.1% to $22.20, while KB Home's stock gained 2.6% to $20.21.
The Dow Jones US Home Construction index rose 0.7%.
On the Nasdaq, Palm Inc fell 3% to $14.01 a day after the company gave a tepid second-quarter sales forecast and said it plans to sell 16 million shares of common stock.
Volume was heavy on the New York Stock Exchange, with 2.28 billion shares changing hands, well above last year's estimated daily average of 1.49 billion,while on the Nasdaq, about 3.16 billion shares traded, also far above last year's daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of three-to-two, while on the Nasdaq,14 stocks rose for every 13 that fell.
The Dow hit a new 11-month high and capped its best week in two months as Citigroup said Procter & Gamble,maker of Tide detergent and Pampers,is poised to win market share through aggressive pricing.
Procter & Gamble's shares rose 3.2%to $57.32. The S&P consumer staples index, up 1.1%, was among the S&P 500's best-performing sectors.
"It's sort of cautious optimism. What that's doing is leading to analyst upgrades, and we're seeing analysts raising earnings estimates for both this year and for calendar 2010 fairly consistently,"said Fred Dickson, market strategist at DA Davidson & Co in Lake Oswego,Oregon.
The S&P 500 is up 58% since hitting a 12-year closing low in early March,partly because of strong second-quarter earnings and optimism that an economic recovery is gaining traction.
Home builders Toll Brothers and KB Home both were upgraded by JP Morgan Securities, which said the housing sector will continue to recover over the next 24 months and drive the current rally in home builders' stocks.
The Dow Jones industrial average was up 36.28 points, or 0.37%, at 9,820.20.The Standard & Poor's 500 Index was up 2.81 points, or 0.26%, at 1,068.30 while the Nasdaq Composite Index was up 6.11 points, or 0.29%, at 2,132.86.
It was the market's second-straight week of gains. Last week, the Dow rose 2.24%, the S&P 500 gained 2.45% and the Nasdaq advanced 2.50%.
"Quadruple witching," the expiration and settlement of four different types of September equity futures and options contracts, seemed "fairly quiet". Mr Dickson said, though the event sometimes leads to increased volatility.
Oil company Chevron Corp also was upgraded.
Credit Suisse said Chevron looks best equipped of the major oil companies to deliver growth "over the coming cycle to 2020". The stock rose 0.9% to $72.64.
Toll Brothers shares rose 3.1% to $22.20, while KB Home's stock gained 2.6% to $20.21.
The Dow Jones US Home Construction index rose 0.7%.
On the Nasdaq, Palm Inc fell 3% to $14.01 a day after the company gave a tepid second-quarter sales forecast and said it plans to sell 16 million shares of common stock.
Volume was heavy on the New York Stock Exchange, with 2.28 billion shares changing hands, well above last year's estimated daily average of 1.49 billion,while on the Nasdaq, about 3.16 billion shares traded, also far above last year's daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of three-to-two, while on the Nasdaq,14 stocks rose for every 13 that fell.
DEMAND FOR IPOS JUMPS AS SHARES STAGE BIG RALLY
Coming off its worst year in three decades, the market for initial public offerings is starting to show signs of life.
Eight companies are looking to raise as much as US$3.7 billion (Bt125 billion) when they go public next week, the most activity the US IPO market has seen in a single week in nearly two years and a clear sign that Wall Street's appetite for risk is returning.
IPOs all but dried up in 2008 as investors shunned the traditionally risky bets and moved into safer assets like cash and treasuries as the stock market tumbled.
Only 43 companies completed IPOs in the US last year, down from 272 the year before and 221 in 2006, according to Renaissance Capital's IPOHome.com.
It was the slowest year for IPOs since 1978.
The amount of money raised through IPOs last year sank 53 per cent to $28 billion, but more thanhalf of that came from just one sale.
Without the mammoth $18 billion Visa offering in March, the largest US IPO on record, last year's total would have been a paltry $10 billion, far below the $59.7 billion raised in 2007.
In another sign of how poor demand has been, the number of companies that cancelled their planned offerings nearly doubled in 2008 from the year before, according to IPOHome.com. The deals that did make it had disappointing returns, further discouraging investors.
The IPO market has trudged along so far this year, with 22 companies raising $5 billion in capital. Next week's heavy load of offering could mark a turning point in the market - if all goes well.
"The IPO market has windows that open and close, and right now the window is open to get deals done," said Sal Morreale, an institutions salesman with Cantor Fitzgerald in Los Angeles.
Analysts attribute the resurgence in IPO activity to growing confidence in the stock market. Major stock indicators are up more than 50 per cent since hitting 12-year lows in early March.
With investors showing a willingness to take chances, companies are starting to feel better about raising money through stock offerings.
The number of companies preparing to go public has been gaining pace since early July, four months after the stock market bottomed out.
There are now 89 companies in the IPO pipeline, up from 29 in March. It tupically takes a couple of months for a company to prepare for a stock offering after the initial paperwork is filed with regulators.
"This pot has been bubbling," said John Fitzgibbon, founder of IPOScoop.com. "It's just taken a while for the courage to settle in the market to take that step forward."
"The number of companies preparing to go public has been gaining pace since early July, four months after the stock market bottomed out."
Eight companies are looking to raise as much as US$3.7 billion (Bt125 billion) when they go public next week, the most activity the US IPO market has seen in a single week in nearly two years and a clear sign that Wall Street's appetite for risk is returning.
IPOs all but dried up in 2008 as investors shunned the traditionally risky bets and moved into safer assets like cash and treasuries as the stock market tumbled.
Only 43 companies completed IPOs in the US last year, down from 272 the year before and 221 in 2006, according to Renaissance Capital's IPOHome.com.
It was the slowest year for IPOs since 1978.
The amount of money raised through IPOs last year sank 53 per cent to $28 billion, but more thanhalf of that came from just one sale.
Without the mammoth $18 billion Visa offering in March, the largest US IPO on record, last year's total would have been a paltry $10 billion, far below the $59.7 billion raised in 2007.
In another sign of how poor demand has been, the number of companies that cancelled their planned offerings nearly doubled in 2008 from the year before, according to IPOHome.com. The deals that did make it had disappointing returns, further discouraging investors.
The IPO market has trudged along so far this year, with 22 companies raising $5 billion in capital. Next week's heavy load of offering could mark a turning point in the market - if all goes well.
"The IPO market has windows that open and close, and right now the window is open to get deals done," said Sal Morreale, an institutions salesman with Cantor Fitzgerald in Los Angeles.
Analysts attribute the resurgence in IPO activity to growing confidence in the stock market. Major stock indicators are up more than 50 per cent since hitting 12-year lows in early March.
With investors showing a willingness to take chances, companies are starting to feel better about raising money through stock offerings.
The number of companies preparing to go public has been gaining pace since early July, four months after the stock market bottomed out.
There are now 89 companies in the IPO pipeline, up from 29 in March. It tupically takes a couple of months for a company to prepare for a stock offering after the initial paperwork is filed with regulators.
"This pot has been bubbling," said John Fitzgibbon, founder of IPOScoop.com. "It's just taken a while for the courage to settle in the market to take that step forward."
"The number of companies preparing to go public has been gaining pace since early July, four months after the stock market bottomed out."
WARREN BUFFETT'S PLUG FOR DALIAN SENDS STOCK SOARING
Billionaire Warren Buffett turned Dalian Dayang Trands into China's best-performing clothing stock after saying he wears the company's suits and praising it as "wonderful".
Dayang, based in the northeastern city of Dalian, surged by the 10 per cent daily limit for a fourth day in Shanghai after Dayang posted a video on its website of Buffett congratulating the company and chairman Li Guilian on its 30th anniversary.
The stock closed at 14.67 yuan (Bt72), its highest since January 2008.
"I have to tell you that I now have nine suits all made in China. I threw away the rest of my suits," Bershire Hathway's chairman and CEo Buffett, 79, says in the video, adding that his business partner Charlie Munger and Microsoft Corp chairman Bill Gates also wear Dayang's outfits.
Dayang is up 261 per cent this year, the most of 25 appael comapnies traded in Shanghai and SHenzhen.
The company, with 2008 sales of 894.6 million yuan, and a market value of less than $350 million (Bt12 billion), does not have any "disclosable business relationship" with Buffett, it said.
"Buffett has a lot of influence on the stock market and so when Dalian Dayang shows him wearing their suits, that has an impact," said Kong Jun, a Shanghai-based analyst at China Jianyin Investment Securities.
Kong recommends investors buy Dalian Dayang's shares.
Buffett assistant Carries Kizer confirmed Buffett recorded the video at Li's request.
"It was something they asked him to do and he agreed," Kizer said in an e-mail.
Dayang's spokesman could not be reached for comment.
"It's been a long time since I got compliments on how I look but since I'm wearing Madam Li's suits, I get compliments all the time," he says.
Buffett, the world's second-richest lman with an estimated fortune of $37 billion according to Forbes magazine, jokes inthe video that "maybe Bill and I could start a clothing store-and sell the compaby's suits, adding that "some day we might even be rich, who knows?"
Gates is the world's richest man with wealth of $40 billion, according to Forbes.
Li founded Dayang in September 1979 with 85 employees, according to its website.
She now has around 6,800 workers and about 40 per cent of sales are derived from the US and Europe.
"Imagine starting 30 years ago with a sewing machine and now turning out maybe 5 milliuon suits or something like that a year," Buffett says in the video.
"It's a story that should inspire people in China and inspire people around the world."
The company has 20 stores in 11 cities in China, according to its website.
Ait is 250-square metre store in Beijing's Finance Street Shopping Centre, tailored suits range from 6,800 yuan at the cheapest to 21,000 yuan when made with Loro Piana cloth, said a saleswoman in the shop. Off-the-peg outfits cost about 8,000 yuan.
Visitors the shop, which features plush armchairs, can order an entire wardrobe from suits to shirts, belts, leather accessories, shoes, ties and cufflinks. Customers buying suits at the top end of the price range may be looked after by Ivano Cattarin, who left Giorgio Armani to become Dayang's chief designer, the sales-woman said, declining to give her name.
Chinese President Hu Jintao wore a Dayang suit when he met former US president George W Bush at the Asia-Pacific Economic Forum in 2007, according to a bound volume in the store's waiting area.
Dayang, based in the northeastern city of Dalian, surged by the 10 per cent daily limit for a fourth day in Shanghai after Dayang posted a video on its website of Buffett congratulating the company and chairman Li Guilian on its 30th anniversary.
The stock closed at 14.67 yuan (Bt72), its highest since January 2008.
"I have to tell you that I now have nine suits all made in China. I threw away the rest of my suits," Bershire Hathway's chairman and CEo Buffett, 79, says in the video, adding that his business partner Charlie Munger and Microsoft Corp chairman Bill Gates also wear Dayang's outfits.
Dayang is up 261 per cent this year, the most of 25 appael comapnies traded in Shanghai and SHenzhen.
The company, with 2008 sales of 894.6 million yuan, and a market value of less than $350 million (Bt12 billion), does not have any "disclosable business relationship" with Buffett, it said.
"Buffett has a lot of influence on the stock market and so when Dalian Dayang shows him wearing their suits, that has an impact," said Kong Jun, a Shanghai-based analyst at China Jianyin Investment Securities.
Kong recommends investors buy Dalian Dayang's shares.
Buffett assistant Carries Kizer confirmed Buffett recorded the video at Li's request.
"It was something they asked him to do and he agreed," Kizer said in an e-mail.
Dayang's spokesman could not be reached for comment.
"It's been a long time since I got compliments on how I look but since I'm wearing Madam Li's suits, I get compliments all the time," he says.
Buffett, the world's second-richest lman with an estimated fortune of $37 billion according to Forbes magazine, jokes inthe video that "maybe Bill and I could start a clothing store-and sell the compaby's suits, adding that "some day we might even be rich, who knows?"
Gates is the world's richest man with wealth of $40 billion, according to Forbes.
Li founded Dayang in September 1979 with 85 employees, according to its website.
She now has around 6,800 workers and about 40 per cent of sales are derived from the US and Europe.
"Imagine starting 30 years ago with a sewing machine and now turning out maybe 5 milliuon suits or something like that a year," Buffett says in the video.
"It's a story that should inspire people in China and inspire people around the world."
The company has 20 stores in 11 cities in China, according to its website.
Ait is 250-square metre store in Beijing's Finance Street Shopping Centre, tailored suits range from 6,800 yuan at the cheapest to 21,000 yuan when made with Loro Piana cloth, said a saleswoman in the shop. Off-the-peg outfits cost about 8,000 yuan.
Visitors the shop, which features plush armchairs, can order an entire wardrobe from suits to shirts, belts, leather accessories, shoes, ties and cufflinks. Customers buying suits at the top end of the price range may be looked after by Ivano Cattarin, who left Giorgio Armani to become Dayang's chief designer, the sales-woman said, declining to give her name.
Chinese President Hu Jintao wore a Dayang suit when he met former US president George W Bush at the Asia-Pacific Economic Forum in 2007, according to a bound volume in the store's waiting area.
Ban on "flashes" sought
US securities regulators proposed on Thursday a ban on flash orders that stock exchanges send to a select group of traders, fractions of a second before revealing them publicly.
The Securities and Exchange Commission is seeking to end the practice criticised for giving an unfair advantage to some market participants who have lightning-fast computer trading software.
Nasdaq OMX's Nasdaq Stock Market and privately-held BATS Exchange recently canceled their flash services that disclosed buy and sell orders to specific trading firms before sending them to the wider market.
NYSE Euronext's New York Stock Exchange did not adopt the flashes under scrutiny but major alternative venue Direct Edge still offers flashes.
The SEC will put its proposal out for public comment for 60 days, and will later schedule a meeting to decide whether to adopt the proposal.
The agency said it would seek feedback on the cost and benefits of the proposed ban, and whether the use of flash orders in options markets should be evaluated differently from those in equity markets.
The agency also tightened rules on credit rating agencies by imposing more disclosure requirements and encouraging unsolicited ratings. Those moves, and others proposed by the SEC, took aim at an industry widely criticised as having fueled the financial crisis through overgenerous ratings assigned to toxic mortgage-backed securities.
The proposed ban on flash orders is part of a broader effort by the SEC to crack down on obscure corners of the US stock market.
SEC chairman Mary Schapiro said the agency would keep reviewing trading practices that may give an unfair advantage to some market players."Other market practices may have similar opaque features," she said.
Supporters of high-frequency trading practices such as flash trading say they add needed liquidity to the markets,and allowed the markets to function smoothly during the financial crisis.
But critics, including some lawmakers,say the markets need to be better policed so all investors are operating on an even playing field.
In July, Senator Charles Schumer, a New York Democrat, told the SEC to curb flash trading and threatened the agency with legislation if it failed to do so.
Schumer said in a statement on Thursday that flash trading could seriously undermine fairness and transparency in markets.
"This ban, as proposed, is pretty much water-tight and should not be weakened by the commission as the rule-making process goes forward," he said.
Joe Mecane, NYSE Euronext's executive vice president of US markets, has said flashes were "a relatively small debate that evolved into a very large debate."
At most, flashes represented less than 3% of US equity trading volume.
All five SEC commissioners voted to propose the flash trading ban, but some were cautious about overreaching in reviewing other market practices.
Troy Paredes, a Republican commissioner, said investors ultimately benefit from regulatory restraint."Exchanges and other trading venues need flexibility to innovate new products, services and trading opportunities."
The Securities and Exchange Commission is seeking to end the practice criticised for giving an unfair advantage to some market participants who have lightning-fast computer trading software.
Nasdaq OMX's Nasdaq Stock Market and privately-held BATS Exchange recently canceled their flash services that disclosed buy and sell orders to specific trading firms before sending them to the wider market.
NYSE Euronext's New York Stock Exchange did not adopt the flashes under scrutiny but major alternative venue Direct Edge still offers flashes.
The SEC will put its proposal out for public comment for 60 days, and will later schedule a meeting to decide whether to adopt the proposal.
The agency said it would seek feedback on the cost and benefits of the proposed ban, and whether the use of flash orders in options markets should be evaluated differently from those in equity markets.
The agency also tightened rules on credit rating agencies by imposing more disclosure requirements and encouraging unsolicited ratings. Those moves, and others proposed by the SEC, took aim at an industry widely criticised as having fueled the financial crisis through overgenerous ratings assigned to toxic mortgage-backed securities.
The proposed ban on flash orders is part of a broader effort by the SEC to crack down on obscure corners of the US stock market.
SEC chairman Mary Schapiro said the agency would keep reviewing trading practices that may give an unfair advantage to some market players."Other market practices may have similar opaque features," she said.
Supporters of high-frequency trading practices such as flash trading say they add needed liquidity to the markets,and allowed the markets to function smoothly during the financial crisis.
But critics, including some lawmakers,say the markets need to be better policed so all investors are operating on an even playing field.
In July, Senator Charles Schumer, a New York Democrat, told the SEC to curb flash trading and threatened the agency with legislation if it failed to do so.
Schumer said in a statement on Thursday that flash trading could seriously undermine fairness and transparency in markets.
"This ban, as proposed, is pretty much water-tight and should not be weakened by the commission as the rule-making process goes forward," he said.
Joe Mecane, NYSE Euronext's executive vice president of US markets, has said flashes were "a relatively small debate that evolved into a very large debate."
At most, flashes represented less than 3% of US equity trading volume.
All five SEC commissioners voted to propose the flash trading ban, but some were cautious about overreaching in reviewing other market practices.
Troy Paredes, a Republican commissioner, said investors ultimately benefit from regulatory restraint."Exchanges and other trading venues need flexibility to innovate new products, services and trading opportunities."
FUNDS EASING BACK INTO CHINA
Fund managers recommend investors to gradually invest in China's stock market after its key index has fallen more than 20 per cent since August.
A fund manager from TMB Asset Management who asked not to be named said the movement of the Shanghai Composite Index, which is widely used by fund managers as a benchmark in China's equity market, has been very volatile over the past few months. The market return has fallen more than 20 per cent from the yeartodate return of 87 per cent earlier to 68 per cent as of yesterday.
"China's stock market is in its correction period after it surged hugely during the first seven months of the year. That made its stock prices stay above the fundamental level. There was profittaking for all of August," he said.
He added that TMB Asset Management has recommended its customers to gradually sell shares in China as the market has rallied significantly.
However, the recent correction was partly due to capital outflow into the US stock market as investors believe all the negative news has already been absorbed, while US stocks are not so expensive.
But after the US stocks rallied and started to be too expensive, capital flows would start to go back to China again. China's GDP growth this year is expected to be around 8 per cent, while some economists forecast the Mainland GDP growth will reach 10 per cent or double digits next year.
A senior government researcher was quoted by Bloomberg as saying that China's economic growth may quicken to 10 per cent or more in the fourth quarter because of stimulus spending and a recovery in exports, said Chen Dongqi.
"Economic growth may accelerate from the third quarter until the first quarter," Chen, a researcher at the country's top planning agency, the National Development and Reform Commission, said at a conference in Shanghai yesterday. He sees "doubledigit growth because of the stimulus plan, recovering exports and domestic consumption."
The world's thirdbiggest economy will expand 9.9 percent in the fourth quarter from a year earlier and 10 percent in the first three months of 2010 as the recovery strengthens, according to a Bloomberg News survey of economists last month. Premier Wen Jiabao said last Friday that China "cannot and will not" pull back from stimulus measures.
The fund manager also added that investors should start gradually investing in the China market to diversify investment risk. After the correction, there will be a chance to generate return.
Another fund manager, from Primavest Asset Management, said the correction in the China market was a good opportunity to invest, but investors are strongly recommended to diversify their investments rather than putting all their money into China. The mainland, he said, still needs economic drive from the world economy.
In addition, there is also risk that China's performance could affect the market
The investment should also be gradual. In a 100 per-cent investment portfolio, 5-10 per cent should be allocated to China. As of July, most funds investing in China generated satisfactory returns. The return of the TMB China Equity Index Fund was at 85.08 per cent, while Tisco China India Dividend Fund generated 56.49 per cent. Tisco China India Retirement Fund got 52.32 per cent, while UOB Smart Greater China recorded 43.11 per cent of return. Manulife Strength-Emering Eastern Europe FIF got 43.25 per cent of return. Also as of July, funds that invest in Asia focusing in China also record good return.
PrimaVest-AllianzGI BRIC Stars recorded 58.79 per cent of return, while MFC Invest Asian Equity recorded 58.22 per cent. SCB Asian Emerging Markets Open End could generate 62.12 per cent, while ING Thai BRIC 40 Fund got 39.04 per cent of return, while Asset Plus BRIC got 39.84 per cent. Aberdeen Asia Pacific Equity recorded 43.19 per cent of return, ING Thai All Asia Equity Fund got 13.36 per cent of return.
A fund manager from TMB Asset Management who asked not to be named said the movement of the Shanghai Composite Index, which is widely used by fund managers as a benchmark in China's equity market, has been very volatile over the past few months. The market return has fallen more than 20 per cent from the yeartodate return of 87 per cent earlier to 68 per cent as of yesterday.
"China's stock market is in its correction period after it surged hugely during the first seven months of the year. That made its stock prices stay above the fundamental level. There was profittaking for all of August," he said.
He added that TMB Asset Management has recommended its customers to gradually sell shares in China as the market has rallied significantly.
However, the recent correction was partly due to capital outflow into the US stock market as investors believe all the negative news has already been absorbed, while US stocks are not so expensive.
But after the US stocks rallied and started to be too expensive, capital flows would start to go back to China again. China's GDP growth this year is expected to be around 8 per cent, while some economists forecast the Mainland GDP growth will reach 10 per cent or double digits next year.
A senior government researcher was quoted by Bloomberg as saying that China's economic growth may quicken to 10 per cent or more in the fourth quarter because of stimulus spending and a recovery in exports, said Chen Dongqi.
"Economic growth may accelerate from the third quarter until the first quarter," Chen, a researcher at the country's top planning agency, the National Development and Reform Commission, said at a conference in Shanghai yesterday. He sees "doubledigit growth because of the stimulus plan, recovering exports and domestic consumption."
The world's thirdbiggest economy will expand 9.9 percent in the fourth quarter from a year earlier and 10 percent in the first three months of 2010 as the recovery strengthens, according to a Bloomberg News survey of economists last month. Premier Wen Jiabao said last Friday that China "cannot and will not" pull back from stimulus measures.
The fund manager also added that investors should start gradually investing in the China market to diversify investment risk. After the correction, there will be a chance to generate return.
Another fund manager, from Primavest Asset Management, said the correction in the China market was a good opportunity to invest, but investors are strongly recommended to diversify their investments rather than putting all their money into China. The mainland, he said, still needs economic drive from the world economy.
In addition, there is also risk that China's performance could affect the market
The investment should also be gradual. In a 100 per-cent investment portfolio, 5-10 per cent should be allocated to China. As of July, most funds investing in China generated satisfactory returns. The return of the TMB China Equity Index Fund was at 85.08 per cent, while Tisco China India Dividend Fund generated 56.49 per cent. Tisco China India Retirement Fund got 52.32 per cent, while UOB Smart Greater China recorded 43.11 per cent of return. Manulife Strength-Emering Eastern Europe FIF got 43.25 per cent of return. Also as of July, funds that invest in Asia focusing in China also record good return.
PrimaVest-AllianzGI BRIC Stars recorded 58.79 per cent of return, while MFC Invest Asian Equity recorded 58.22 per cent. SCB Asian Emerging Markets Open End could generate 62.12 per cent, while ING Thai BRIC 40 Fund got 39.04 per cent of return, while Asset Plus BRIC got 39.84 per cent. Aberdeen Asia Pacific Equity recorded 43.19 per cent of return, ING Thai All Asia Equity Fund got 13.36 per cent of return.
BROKER FINDS STRENGTH IN PROPRIETARY TRADING
To prepare for the upcoming liberalisation of brokerage commissions, Phatra Securities has diversified its income structure by focusing heavily on proprietary trading and revamped its management team. The company's board of directors has chosen Apinant Klewpatinond, currently managing director for investment, to fill Suvit Mapaisansin's shoes as CEO, while Suvit will become chairman of the investment committee and executive director, chairman Banyong Pongsanich said yesterday.
The appointments will take effect after the Securities and Exchange Commission gives its nod.
The management revamp does not change business policy but it makes the roles of those who are in charge clearer, he said.
The company's core businesses from now on will be the proprietary and agency businesses.
"All organisations must restructure themselves to comply with global changes. Any organisation that has high flexibility in restructuring, has a good chance to survive. "The company in the past underwent organisation restructuring several times to adapt to the situation. This included selling a major stake to Merrill Lynch before buying it back and cutting headcount to 200 from 250 early this year," he said.
Minimum commissions are currently fixed at 0.25 per cent and 0.20 per cent of transaction value for traditional and online trading.
This will change to a sliding scale on January 1, and to negotiable rates without a minimum in early 2011.However, brokerages with an executive partner can charge the partner a lower rate.
Suvit said Phatra Securities has been doing proprietary trading for two years and its portfolio has reached Bt2.9 billion, of which Bt2 billion is longterm investment and Bt9 million is trading.
Proprietary trade involves the purchase and sale of securities for the brokerage's own account.
Phatra Securities' proprietary trade for the first half already contributed Bt60 million in profit, matching its profit for all of last year.
"The proprietary trade business outlook is prosperous," he said.
"It helps balance the company's income structure and reduces the reliance on commissions. Now, the proprietary business accounts for 35 per cent of the company's income while the agency business makes up the rest," he said.
He admitted that the sliding scale for commissions to be implemented next year would impact the company but it would not be significant as the company's average commission stands at 0.18 per cent.
The company's foreign customers represent 50 per cent of its business while local institutional investors are 20 per cent and the rest is retail investors.
"The company's trading volume averages Bt1 billion to Bt2 billion a day and it would be hurt if the sliding scale is enforced but we can't say to what degree. At present, [executive partner] Merrill Lynch pays 0.15 per cent while general investors pay 0.25 per cent," he said.
"Local customers are willing to pay if the research has enough quality," he said.
The idea to overhaul management came from him, he said. It would strengthen the company and maximise benefits for the organisation, and shareholders in the long run.
"I'm still the company's director and executive director who jointly sets the company's business direction and policy. Also, I'm chairman of the investment committee, which takes responsibility for making decisions on the company's investment and risk, while the new CEO will be in charge of customer management to prevent conflicts of interest," he said.
Phatra Securities is also conducting a study to establish an asset management company.
Suvit said the securities house's earnings this year would be better than last year, as net profit had already reached Bt130.61 million in just six months compared with Bt207.13 million for all of 2008.
The appointments will take effect after the Securities and Exchange Commission gives its nod.
The management revamp does not change business policy but it makes the roles of those who are in charge clearer, he said.
The company's core businesses from now on will be the proprietary and agency businesses.
"All organisations must restructure themselves to comply with global changes. Any organisation that has high flexibility in restructuring, has a good chance to survive. "The company in the past underwent organisation restructuring several times to adapt to the situation. This included selling a major stake to Merrill Lynch before buying it back and cutting headcount to 200 from 250 early this year," he said.
Minimum commissions are currently fixed at 0.25 per cent and 0.20 per cent of transaction value for traditional and online trading.
This will change to a sliding scale on January 1, and to negotiable rates without a minimum in early 2011.However, brokerages with an executive partner can charge the partner a lower rate.
Suvit said Phatra Securities has been doing proprietary trading for two years and its portfolio has reached Bt2.9 billion, of which Bt2 billion is longterm investment and Bt9 million is trading.
Proprietary trade involves the purchase and sale of securities for the brokerage's own account.
Phatra Securities' proprietary trade for the first half already contributed Bt60 million in profit, matching its profit for all of last year.
"The proprietary trade business outlook is prosperous," he said.
"It helps balance the company's income structure and reduces the reliance on commissions. Now, the proprietary business accounts for 35 per cent of the company's income while the agency business makes up the rest," he said.
He admitted that the sliding scale for commissions to be implemented next year would impact the company but it would not be significant as the company's average commission stands at 0.18 per cent.
The company's foreign customers represent 50 per cent of its business while local institutional investors are 20 per cent and the rest is retail investors.
"The company's trading volume averages Bt1 billion to Bt2 billion a day and it would be hurt if the sliding scale is enforced but we can't say to what degree. At present, [executive partner] Merrill Lynch pays 0.15 per cent while general investors pay 0.25 per cent," he said.
"Local customers are willing to pay if the research has enough quality," he said.
The idea to overhaul management came from him, he said. It would strengthen the company and maximise benefits for the organisation, and shareholders in the long run.
"I'm still the company's director and executive director who jointly sets the company's business direction and policy. Also, I'm chairman of the investment committee, which takes responsibility for making decisions on the company's investment and risk, while the new CEO will be in charge of customer management to prevent conflicts of interest," he said.
Phatra Securities is also conducting a study to establish an asset management company.
Suvit said the securities house's earnings this year would be better than last year, as net profit had already reached Bt130.61 million in just six months compared with Bt207.13 million for all of 2008.
Kirin gets nod to buy Lion Nathan
Shareholders in Australian beverages giant Lion Nathan voted overwhelmingly in favour of a 3.3-billion-Australian-dollar (Bt97 billion) takeover offer from Japan's Kirin yesterday.
Kirin,Japan's biggest brewer by revenue, already owns 46.13 per cent of Lion Nathan, and shareholders voted 98.75 per cent in favour of handing over the remaining 53.87 per cent.
"In doing so, shareholders followed the unanimous recommendation of Lion Nathan's independent directors," Sydney-based Lion said in a statement to the market.
Final approval for the deal will be sought in the Federal court of Australia on October 7, it added.
Lion Nathan is Australia's second-largest brewer and owns beer brands such as Tooheys, XXXX, Heineken and Hahn.
Kirin, which also owns Dairy Farmers and National Foods in Australia, first bought into Lion Nathan in 1998. It received Australian regulatory approval for a complete takeover of the firm in June.
Kirin remains in merger talks with smaller Japanese rival Suntory Comnined, the companies have annual sales of about 3.8 trillion yen (Bt1.5 trillion), well ahead of the world's top brewer AB InBev.
Kirin,Japan's biggest brewer by revenue, already owns 46.13 per cent of Lion Nathan, and shareholders voted 98.75 per cent in favour of handing over the remaining 53.87 per cent.
"In doing so, shareholders followed the unanimous recommendation of Lion Nathan's independent directors," Sydney-based Lion said in a statement to the market.
Final approval for the deal will be sought in the Federal court of Australia on October 7, it added.
Lion Nathan is Australia's second-largest brewer and owns beer brands such as Tooheys, XXXX, Heineken and Hahn.
Kirin, which also owns Dairy Farmers and National Foods in Australia, first bought into Lion Nathan in 1998. It received Australian regulatory approval for a complete takeover of the firm in June.
Kirin remains in merger talks with smaller Japanese rival Suntory Comnined, the companies have annual sales of about 3.8 trillion yen (Bt1.5 trillion), well ahead of the world's top brewer AB InBev.
TEMASEK'S NET PROFIT DIVES 67 PER CENT
Singapore state investment firm Temasek Holdinngs said yesterday its net profit plunged 67 per cent to 6 billion Singapore dollars (Bt143.5 billion) in the year to March.
Net profit fell from the record S$18 billion achieved in the financial year ending March 2008 as a result of the global financial crisis.
The value of its worldwide investment portfolio also fell 30 per cent to S$130 billion as of end-March from S$185 billion the previous financial year.
Temasek chief executive Ho Ching said at a news conference the firm was building up liquidity to prepare for a possible downturn.
"However, we did not anticipate the speed and ferocity of the worst financial crisis since the Great Depression," said Ho, wife of Singapore Prime Minister Lee Hsien Loong.
"Looking ahead, we believe the worst of the global meltdown to plummet in the second half of last year.
Some of its losses came from investments in Western financial companies that were in need of a capital injection as the economic crisis unfolded following the collapse of US investment bank Lehman Brothers.
It took a stake in Wall Street icon Merrill Lynch but when the US firm was bought by Bank of America, Temasek divested its interest. Ity also bought into British lender Barclays but later also offloaded that stake.
It is estimated Temasek lost more than US$5.4 billion (Bt181.9 billion) from the sale of its holdings in the two banks, according to sources quoted by Dow Jones Newswires.
Net profit fell from the record S$18 billion achieved in the financial year ending March 2008 as a result of the global financial crisis.
The value of its worldwide investment portfolio also fell 30 per cent to S$130 billion as of end-March from S$185 billion the previous financial year.
Temasek chief executive Ho Ching said at a news conference the firm was building up liquidity to prepare for a possible downturn.
"However, we did not anticipate the speed and ferocity of the worst financial crisis since the Great Depression," said Ho, wife of Singapore Prime Minister Lee Hsien Loong.
"Looking ahead, we believe the worst of the global meltdown to plummet in the second half of last year.
Some of its losses came from investments in Western financial companies that were in need of a capital injection as the economic crisis unfolded following the collapse of US investment bank Lehman Brothers.
It took a stake in Wall Street icon Merrill Lynch but when the US firm was bought by Bank of America, Temasek divested its interest. Ity also bought into British lender Barclays but later also offloaded that stake.
It is estimated Temasek lost more than US$5.4 billion (Bt181.9 billion) from the sale of its holdings in the two banks, according to sources quoted by Dow Jones Newswires.
FAMILY KNOW-HOW EXPECTS 2010 PROFIT
A net profit of Bt100 million is expected next year for SET subsidiary Family Know-How after it extends its broadcasting to 18 hours a day, GMM Grammy chairman Paiboon Damrongchaitham said yesterday.
GMM recently bought more than half of the unit.
Family Know-How owns the Money Channel, which provides financial and investment-related content to other channels and the SET.
SET president Patareeya Benjapholchai said she welcomed GMM's entry, because the subsidiary had suffered losses in recent years.
Paiboon said after a shareholding restructuring, airtime would increase from eight-a-half hours a day to 18 hours. Broadcast of SET content will remain at eight-a-half hours, while the company will produce an additional nine-and-a-half hours of programming for others.
This should generate an additional Bt400 million in revenue next year, he said.
"Our target clients are listed companies. GMM believes the new business will go well, because we have more than 20 years' experience in television. We have marketing teams and experts in the field who can run it," he said.
GMM Grammy director Sumeth Damrongchaitham said existing employees would remain, due to their knowledge of the capital market, while new, creative people would be hired to design attractive programmes that could attract a bigger audience share.
New programmes for the additional broadcast hours are now being designed, and listed companies can advertise on the channel, he said.
"The Money Channel has an audience base of 1 million viewers. We believe that number will increase once we adjust the programming," he said.
Family Know-How will have registered capital of Bt50 million after the restructuring.
GMM recently bought more than half of the unit.
Family Know-How owns the Money Channel, which provides financial and investment-related content to other channels and the SET.
SET president Patareeya Benjapholchai said she welcomed GMM's entry, because the subsidiary had suffered losses in recent years.
Paiboon said after a shareholding restructuring, airtime would increase from eight-a-half hours a day to 18 hours. Broadcast of SET content will remain at eight-a-half hours, while the company will produce an additional nine-and-a-half hours of programming for others.
This should generate an additional Bt400 million in revenue next year, he said.
"Our target clients are listed companies. GMM believes the new business will go well, because we have more than 20 years' experience in television. We have marketing teams and experts in the field who can run it," he said.
GMM Grammy director Sumeth Damrongchaitham said existing employees would remain, due to their knowledge of the capital market, while new, creative people would be hired to design attractive programmes that could attract a bigger audience share.
New programmes for the additional broadcast hours are now being designed, and listed companies can advertise on the channel, he said.
"The Money Channel has an audience base of 1 million viewers. We believe that number will increase once we adjust the programming," he said.
Family Know-How will have registered capital of Bt50 million after the restructuring.
Friday, September 18, 2009
Stocks rise on retail sales, manufacturing data
Better news on retail sales and manufacturing helped send stocks higher Tuesday, as did comments fr om Federal Re serve Chairman Ben Bernanke that the recession was probably over.
Surging materials and industrial companies like Alcoa and Caterpillar pulled the Dow Jones industrial average to a gain of 57 points, its seventh climb in eight days and another high for the year. Manufacturers are expected to be among the early beneficiaries if the economy strengthens and demand picks up.
Hopes for a re bound grew after the government reported that retail sales jumped in August by the biggest amount in three years. The Fed's index of manufacturing in the New York region rose to its best level since late 2007.
Those doses of positive economic news helped allay concerns about a separate government report finding that inflation at the wholesale level rose last month at double the rate analysts expected.
Meanwhile, Bernanke cheered investors by saying that the worst recession since the 1930s has 'ver y likely" ended, though he cautioned that problems like high unemployment will remain.
Investors have been betting on a recover y. The S tandard & Poor's 500 index, the benchmark for many mutual funds, has surged 55.6% since skidding to a 12-year low in March.
Stocks zigzagged in morning trading before gaining steam in the afternoon, similar to the way trading played out Monday. Analysts say the slow-building gains are a sign that investors are pouncing on dips to get into the rally.
The short bouts of selling have meant the market has advanced without the sizable break, which many analysts still say is overdue. Even when the news isn't good,market sentiment seems immune to developments that would have punctured the rally only months ago.
Investors shrugged off news that wholesale prices rose 1.7% jump last month, and disappointing earnings from two major retailers, Best Buy Co and Kroger Co, also failed to push the stock market off course.
"You want to say that the market is a little bit tired after the run we've had yet we continue to grind higher,"said Ryan Larson, senior equity trader at Voyageur Asset Management.
The Dow rose 56.61, or 0.6%, to 9,683.41, its highest close since Oct 6, when it finished at 9,956.
The S&P 500 index rose 3.29, or 0.3%, to 1,052.63,while the Nasdaq composite index rose 10.86, or 0.5%,to 2,102.64. All three indicators are at their highest levels for 2009.
More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.5 billion shares compared with 1.2 billion Monday.
The government's report that retail sales jumped 2.7% in August boosted confidence in the economy.Analysts say improvements in consumer spending are crucial to a recovery.
Even after stripping out the sizable gains from the government's popular Ca sh for Clunkers program, sales rose 1.1%, well beyond the rise of 0.4% expected by analysts.
Commodity and industrial stocks rose as a weaker dollar pushed up mater ials prices. Alcoa Inc added $1.05, or 8.1%, to $13.99. Caterpillar Inc rose $2.93, or 6%, to $51.70.
Gregg S. Fisher, chief investment officer at financial advisory firm Gerstein Fisher in New York, said despite the recent gains investors could still run into trouble.
"Investors are always following the herd. I think investors should sort of catch themselves now and not get overconfident," he said.
The market's latest gains came one year after the Dow tumbled 500 points following the collapse of Lehman Brothers Holdings Inc, which deepened the recession.
In other trading, bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.46% from 3.43% late Monday.
Crude oil rose $2.07 to settle at $70.93 a barrel on the New Yo rk Mercantile E xchange. Gold also rose after the report on inflation. The metal is often used as a hedge against rising prices.
The Russell 2000 index of smaller companies rose 4.81, or 0.8%, to 604.84. AP
LONDON 5,042.13 +23.28
Britain's top share index rose for a third straight session on Tuesday to close up 0.5%, boosted by bullish economic data from the United States, as heavyweight oils, miners and banks underpinned the rally.
The FTSE 100 ended 23.28 points higher at 5,042.13,after trading as low as 4,996.52 earlier in the session.
In Frankfurt, the DAX index ended at 5,628.98 points, up 8.74 or 0.16%. In Paris, the CAC-40 index closed at 3,752.21 points, up 21.6 or 0.58%.
The UK index is up 45.7% since touching its March lows. However, it is still 6.9% below the level it was before the collapse of Lehman Brothers a year ago.
"Investors have digested the figures from across the pond and have plunged back in to this market and decided to run with this rally," said Jimmy Yates, Head of Equities at CMC Markets.
US retail sales rose at their fastest pace in threeand-half years in August as government-sponsored auto incentives buoyed demand for motor vehicles,according to data that showed sales outside the auto sector also were strong.
Meanwhile, US producer pr ices rose more than twice as much as expected in August on the biggest surge in gasoline prices in more than 10 years and prices declined less than expected compared with a year ago,a government report revealed..
The market also got a boost from US Federal Reserve Chairman Ben Bernanke who said the US economic recession was probably over but the recover y would be slow and take time to create new jobs.
Energy stocks we re higher, underpinned by a strengthening US dollar which rose against a basket of currencies and lifted crude, which hovered around $69 a barrel.
BP, Royal Dutch Shell and Cairn Energy gained 0.6-3.7%.
BG Group added 1.4% after unveiling another discovery in the Santos Basin concession, offshore Brazil.
Oil and gas explorer Tullow Oil, up 1.2%, also got an additional boost from bid speculation, with market chatter mentioning Italian ENI as a possible predator.Neither company commented on the rumour.
International Power was up 2.6% in a read across from news that China's sovereign we alth fund is eyeing a stake in US power company peer AES Corp.
Takeover speculation also saw Man Group climb 3.2%on rehashed bid rumours.
"It's no surprise that investors are once again targeting the usual suspects (miner, banks and oils). They're getting their bang for their buck," Yates said.
Banks were mixed. Royal Bank of Scotland, HSBC and Standard Chartered rose 1.3-1.4%, while Lloyds Banking Group and Barclays were 0.6 and 0.2% lower respectively.
Bank of England Governor Mervyn King said the central bank was looking at reducing the rate on commercial banks' reserves, fuelling speculation of further quantitative easing. The comments sent sterling lower.
Miners gained as metal prices rebounded from the previous session's lows. Fresnillo, Rio Tinto, Xstrata, BHP Billiton and Kazakhmys added 0.5-3.7%.
Also on the upside, BT Group rose 4.4%, buoyed by a Credit Suisse upgrade to 'outperform" from 'neutral' ,while precious metals and chemicals firm Johnson Matthey gained 3.2% following a Goldman Sachs upgrade.
Rexam fell 2.2% after Credit Suisse removed the drinks can maker from its Focus List, and technology firm Smiths Group shed 1.7% after Morgan Stanley cut its rating to "equal-weight".
Surging materials and industrial companies like Alcoa and Caterpillar pulled the Dow Jones industrial average to a gain of 57 points, its seventh climb in eight days and another high for the year. Manufacturers are expected to be among the early beneficiaries if the economy strengthens and demand picks up.
Hopes for a re bound grew after the government reported that retail sales jumped in August by the biggest amount in three years. The Fed's index of manufacturing in the New York region rose to its best level since late 2007.
Those doses of positive economic news helped allay concerns about a separate government report finding that inflation at the wholesale level rose last month at double the rate analysts expected.
Meanwhile, Bernanke cheered investors by saying that the worst recession since the 1930s has 'ver y likely" ended, though he cautioned that problems like high unemployment will remain.
Investors have been betting on a recover y. The S tandard & Poor's 500 index, the benchmark for many mutual funds, has surged 55.6% since skidding to a 12-year low in March.
Stocks zigzagged in morning trading before gaining steam in the afternoon, similar to the way trading played out Monday. Analysts say the slow-building gains are a sign that investors are pouncing on dips to get into the rally.
The short bouts of selling have meant the market has advanced without the sizable break, which many analysts still say is overdue. Even when the news isn't good,market sentiment seems immune to developments that would have punctured the rally only months ago.
Investors shrugged off news that wholesale prices rose 1.7% jump last month, and disappointing earnings from two major retailers, Best Buy Co and Kroger Co, also failed to push the stock market off course.
"You want to say that the market is a little bit tired after the run we've had yet we continue to grind higher,"said Ryan Larson, senior equity trader at Voyageur Asset Management.
The Dow rose 56.61, or 0.6%, to 9,683.41, its highest close since Oct 6, when it finished at 9,956.
The S&P 500 index rose 3.29, or 0.3%, to 1,052.63,while the Nasdaq composite index rose 10.86, or 0.5%,to 2,102.64. All three indicators are at their highest levels for 2009.
More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.5 billion shares compared with 1.2 billion Monday.
The government's report that retail sales jumped 2.7% in August boosted confidence in the economy.Analysts say improvements in consumer spending are crucial to a recovery.
Even after stripping out the sizable gains from the government's popular Ca sh for Clunkers program, sales rose 1.1%, well beyond the rise of 0.4% expected by analysts.
Commodity and industrial stocks rose as a weaker dollar pushed up mater ials prices. Alcoa Inc added $1.05, or 8.1%, to $13.99. Caterpillar Inc rose $2.93, or 6%, to $51.70.
Gregg S. Fisher, chief investment officer at financial advisory firm Gerstein Fisher in New York, said despite the recent gains investors could still run into trouble.
"Investors are always following the herd. I think investors should sort of catch themselves now and not get overconfident," he said.
The market's latest gains came one year after the Dow tumbled 500 points following the collapse of Lehman Brothers Holdings Inc, which deepened the recession.
In other trading, bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.46% from 3.43% late Monday.
Crude oil rose $2.07 to settle at $70.93 a barrel on the New Yo rk Mercantile E xchange. Gold also rose after the report on inflation. The metal is often used as a hedge against rising prices.
The Russell 2000 index of smaller companies rose 4.81, or 0.8%, to 604.84. AP
LONDON 5,042.13 +23.28
Britain's top share index rose for a third straight session on Tuesday to close up 0.5%, boosted by bullish economic data from the United States, as heavyweight oils, miners and banks underpinned the rally.
The FTSE 100 ended 23.28 points higher at 5,042.13,after trading as low as 4,996.52 earlier in the session.
In Frankfurt, the DAX index ended at 5,628.98 points, up 8.74 or 0.16%. In Paris, the CAC-40 index closed at 3,752.21 points, up 21.6 or 0.58%.
The UK index is up 45.7% since touching its March lows. However, it is still 6.9% below the level it was before the collapse of Lehman Brothers a year ago.
"Investors have digested the figures from across the pond and have plunged back in to this market and decided to run with this rally," said Jimmy Yates, Head of Equities at CMC Markets.
US retail sales rose at their fastest pace in threeand-half years in August as government-sponsored auto incentives buoyed demand for motor vehicles,according to data that showed sales outside the auto sector also were strong.
Meanwhile, US producer pr ices rose more than twice as much as expected in August on the biggest surge in gasoline prices in more than 10 years and prices declined less than expected compared with a year ago,a government report revealed..
The market also got a boost from US Federal Reserve Chairman Ben Bernanke who said the US economic recession was probably over but the recover y would be slow and take time to create new jobs.
Energy stocks we re higher, underpinned by a strengthening US dollar which rose against a basket of currencies and lifted crude, which hovered around $69 a barrel.
BP, Royal Dutch Shell and Cairn Energy gained 0.6-3.7%.
BG Group added 1.4% after unveiling another discovery in the Santos Basin concession, offshore Brazil.
Oil and gas explorer Tullow Oil, up 1.2%, also got an additional boost from bid speculation, with market chatter mentioning Italian ENI as a possible predator.Neither company commented on the rumour.
International Power was up 2.6% in a read across from news that China's sovereign we alth fund is eyeing a stake in US power company peer AES Corp.
Takeover speculation also saw Man Group climb 3.2%on rehashed bid rumours.
"It's no surprise that investors are once again targeting the usual suspects (miner, banks and oils). They're getting their bang for their buck," Yates said.
Banks were mixed. Royal Bank of Scotland, HSBC and Standard Chartered rose 1.3-1.4%, while Lloyds Banking Group and Barclays were 0.6 and 0.2% lower respectively.
Bank of England Governor Mervyn King said the central bank was looking at reducing the rate on commercial banks' reserves, fuelling speculation of further quantitative easing. The comments sent sterling lower.
Miners gained as metal prices rebounded from the previous session's lows. Fresnillo, Rio Tinto, Xstrata, BHP Billiton and Kazakhmys added 0.5-3.7%.
Also on the upside, BT Group rose 4.4%, buoyed by a Credit Suisse upgrade to 'outperform" from 'neutral' ,while precious metals and chemicals firm Johnson Matthey gained 3.2% following a Goldman Sachs upgrade.
Rexam fell 2.2% after Credit Suisse removed the drinks can maker from its Focus List, and technology firm Smiths Group shed 1.7% after Morgan Stanley cut its rating to "equal-weight".
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