BANKS MAY GAIN FROM QE3 RESULTS

       The flow of foreign investors' cash continued to influence Thai shares this week. We believe it will play an important role in driving the Stock Exchange of Thailand to trade at a price-to-earnings ratio of 14, or 736 points.
       The level is resistant in the short term, while the support level is at 715 points.
       Commercialbank stocks are expected to extend their momentum this week, driven by thirdquarter earnings. The broker estimates seven banks under its coverage will deliver a 13.9-per cent quarter-on-quarter and 7.3-per cent yearonyear rise in their thirdquarter earnings, to a combined Bt22.2 billion.
       Top picks are Bank of Ayudhya, Krung Thai Bank and Kasikornbank. There is speculation Siam City Bank may sell a stake to partners.
       We predicted several midsized marketcap stocks would turn around in the second half of the year, and their prices are below fair value. The outstanding stocks are Preuksa Real Estate, whose secondhalf earnings will be driven by ownershiprights transfer of its four condominium projects and Board of Investment privileges; and Rojana Industrial Park Co, which will realise a profit from its affiliate Ticon Industrial Connection, assets sold to a property fund and the company's strong land sales.
       Hospital and hotel stocks are also recommended "buy", due to their seasonality. One study shows stocks in both sectors always outperform the stock market in October, with the number of patients increasing in the third quarter and hotels entering their high season.
       The outstanding stocks in these groups are Dusit Medical Services and Central Plaza Hotel Co.
       Sukit Udomsirikul, assistant managing director of the Siam City Research Institute
       The positive momentum in the stock market will continue this week on the back of capital inflows if the US dollar's weakness lasts a while longer.
       If the dollar rebounds to more than 1.48 euro, the Stock Exchange of Thailand Index will be affected. Stoploss for shortterm investors is at 710 points.
       Risk factors this week are:
       -Manufacturing output index in August started to slow down and this raises concerns about the global economic recovery.
-If the 76 projects in Map Ta Phut Industrial Estate can not go ahead, it will hurt the country's overall economic and investment and the planned merger and acquisition of 4 firms under PTT - PTT Chemical Plc (PTTCH), PTT Aromatics and Refining Plc (PTTAR0, IRPC Plc (IRPC) and Thai Oil Plc (TOP).
       We estimated that PTTAR's and PTTCH's 2010 earnings would be hurt by 33 and 1325 per cent respectively.
       PTT tends to revise downward its 2010 earnings forecast by 9 per cent while Glow Energy Plc (GLOW) by 8 per cent. However, these stocks would underperform the market.
       - CBOE VIX Index last week rose significantly while return of the US' 10year government bond set the fivemonth low and these are warning signs that Wall Street would see wild volatility soon.
       Investment strategy: Accumulate PTT Exploration and Production Plc (PTTEP) (on an anticipation that it would gain benefit from Map Ta Phut's case), profittaking PTTCH and PTTAR and speculative buy KBANK, BAY, Quality Houses Plc (QH), PS and Khon Khan Sugar Industry Plc (KSL).
       Tisco Securities
       Foreign inflows likely to extend market rally
       Despite increased volatility on Wall Street and regional markets, we expect the SET's sevenmonth rally to be extended in the near term.
       High liquidity, low interest rates and growing signs of economic recovery are the main catalysts behind the rally. Renewed weakness in the dollar is also likely to support foreign fund inflows.
       Although the market is not particularly cheap, we still see good value in selective stocks, particularly consumer plays and companies expected to benefit from the government's second stimulus package (SP2). We also expect greater interest in bank stocks ahead of the third quarter results.
       Note that we have recently revised up our 201011 earnings forecasts for major banks based on our expectations of stronger loan growth over the next two years.
       However, shares of PTT Group companies and Siam Cement could come under nearterm pressure after a court decision last week to suspend the operations of 76 new projects in the Map Tha Put Industrial Estate (MTPIE) and nearby areas in Rayong province with a combined total investment of Bt400 billion.
       The government has already lodged an appeal against the court ruling. The major risk is that the issue could damage foreign direct investment and equity fund inflows if it is not quickly resolved.
       Sectors that stand to benefit from a projected upturn in consumer spending next year should outperform the market, notably auto, telco and financial services including consumer finance.
       Kavee Chukitkasem, Assistant Managing Director from Kasikorn Securities
       Last week, SET index was extremely volatile, shifting up and down the whole week. However, we believe the market movement was apparently just following series of announcements of the U.S. economic figures.
       In our view, most indicators signaled that the economy is still recovering, but investors seemed to be more concern about the unemployment rate which was higher than expected and was the main factor that brought down DJ last week.
       Apart from the negative impact from external factors, negative factors inside the country also put no less pressure on the stock market after the Administrative Court ordered to halt construction of 76 projects in Map Ta Phut area.
       The court order directly hurt project owners, mainly companies of PTT group and SCC group, and as well weighed down the economy as whole since it will discourage investment flow, especially from overseas.
       This will also trigger a negative chain reaction to other sectors such as industrial estates and banks that provided loans to these projects.
       However, despite negative impacts from the U.S. and internal factors, economic indicators of other countries still showing improvement.
       Note that IMF had already revised up forecasts, while the Thai Fiscal Policy Office had increased Thai economic growth estimates.
       We also believe that the problem at Map Ta Phut will be resolved soon. Therefore we maintain our positive view on the stock market in medium term, despite possible market correction in the short term.
       We believe the stock market will zigzag up to 800pts by late this year or early next year while expect the index to zigzag up to 730-pts within next week with supports from the world economic recovery theme and the results of the "Thai Khem Kaeng" project (project to stimulate Thai economy).
       Therefore, we recommend speculating stocks in banking (Bangkok Bank (BBL)) and property (ItalianThai Development Plc (ITD), Sian Property Development Plc (AP), PS) sectors.
       However, shortterm investors must be more cautious since the market may correct at anytime soon as we've seen a warning signal when SET index hit our and most analysts' target for this year at 733-pts. We then recommend investors to buy stocks with a stop loss line or sell if the SET drop below 705-pts given risk that the index may drop further to 690-pts.
       However, medium term investors have no need to reduce their portfolio since we believe the market correction is a good buying opportunity.
       We maintain "Overweight" on Bank (BBL), Exploration and Production (PTT Exploration and Production Plc (PTTEP)), Hotel (CENTEL), Hospital (Bumrungrad Hospital Plc (BH)), ICT (Advanced Info Service Plc (ADVANC)), Commerce (CP All Plc (CPALL)), Agriculture (Charoen Pokphand Foods Plc (CPF)) and Media (GMM Grammy Plc (GRAMMY)).