Thai stocks jumped 3.52% yesterday in a broad-based rebound as concerns about the health of His Majesty the King eased.
The Stock Exchange of Thailand index closed at 717.12 points, up 24.4, in trade worth 29.77 billion baht. The index had fallen 7% over the previous two days on heavy foreign selling.
Foreign investors, who were net sellers of nearly five billion baht worth of stock on Wednesday and Thursday,had a net buy position of 546.74 million baht. Local institutions were net buyers of 301.37 million baht in stock yesterday,while local investors were net sellers of 848.21 million. Energy stocks rose 3.66%yesterday, banks gained 3.05% and property stocks rose 4.14%.
Analysts said market sentiment improved after Finance Minister Korn Chatikavanij urged investors to ignore unsubstantiated rumours and focus instead on the recovering Thai economy.
He said regulators were investigating whether there was any concerted manipulation involved in the declines of the past week, which were touched off largely by foreign institutional selling on worries over the King's health.
The Royal Household Bureau has stated that the 81-year-old monarch,
who has been in hospital since midSeptember, is recovering steadily from a lung infection and was responding well to treatment.
Thirachai Phuvanatnaranubala, the secretary-general of the Securities and Exchange Commission, said securities regulators were working with the police to pinpoint the source of the rumours that led to this week's broad sell-off.
"For now, our preliminary investigation into the heavy declines [on Wednesday and Thursday] show nothing unusual suggesting market manipulation," he said."The selling was not focused on any one particular stock."
Mr Thirachai said the SEC was asking local brokers for co-operation in the investigation.
"Investors must exercise caution and use their own judgment when reacting to news. In any case, we believe that this problem has eased," he said.
SET president Patareeya Benjapolchai said portfolio adjustments by institutional investors were also a key factor behind the correction this week.
The SET index has been one of the best-performing markets in the region this year, gaining 53.95% since January.
Mr Korn said the Thai economy was improving, with exports, tourism and corporate earnings all on the uptrend.
The government is also taking steps to further develop the Thai capital market over the next five years, covering not only the SET but also the bond market, venture capital and other financial services sectors.
Mrs Patareeya said a capital markets development fund would be established to support development programmes.
The SET, with a market capitalisation of 5.7 trillion baht or around 60% of gross domestic product, is expected to rise to exceed the size of the Thai economy within five years, she said.
Paiboon Nalinthrangkurn, chief executive of Tisco Securities, said the market rebound came as investor confidence strengthened because of the belief the rumours were false.
"Market liquidity remains high. Further gains could come next week if there is no negative news," he said.
Investors should monitor earnings reports in the US closely for cues on the direction of the markets.
"I still think that the SET on a fundamental basis is overpriced. An index of 650 points would be more realistic.We can see how strong the correction was this week on negative news. If the market was closer to fair value, then the correction would not be this strong,"Mr Paiboon added.
"I think investors should look forward and focus on the improved economy,"said Voravan Tarapoom, managing director of BBL Asset Management and head of the Association of Investment Management Companies."For BBLAM at least, we were net buyers over the past several days."
Saturday, October 17, 2009
Tuesday, October 13, 2009
Solution Corner exec asked to clarify sale of shares
The Stock Exchange of Thailand yesterday instructed Nitat Maneesilasan, a top executive and shareholder of Solution Corner (1998),to explain why he did not take any action to manage the company by informing share holders and investors without hesitation the complete information on his sale of his shares to investors.
Nitat, as chairman and managing director, has the responsibility to safeguard tha rights of shareholders, even when he was the seller of shares in the company to Dirake Vongchinsri.
This followed the company's filing on September 30 to the SET that it had received no contact from new investors after the SET asked if there was any news regadrding the company's takeover by the IT investor.
But the company reported on September 29 that its major shareholders Nitat and Wantanee Maneesilasan,deputy managing director-had agreed to sell all their shares to Dirake. The company changed the buyer to three investors in information disseminated on Ocotober 1.
Nitat and Wantancee hold a combined 65-per-cent stake of 32 million shares in the company.
Nitat, as chairman and managing director, has the responsibility to safeguard tha rights of shareholders, even when he was the seller of shares in the company to Dirake Vongchinsri.
This followed the company's filing on September 30 to the SET that it had received no contact from new investors after the SET asked if there was any news regadrding the company's takeover by the IT investor.
But the company reported on September 29 that its major shareholders Nitat and Wantanee Maneesilasan,deputy managing director-had agreed to sell all their shares to Dirake. The company changed the buyer to three investors in information disseminated on Ocotober 1.
Nitat and Wantancee hold a combined 65-per-cent stake of 32 million shares in the company.
Monday, October 12, 2009
Wall Street eyes second wind from improving earnings
The US stock market is set to continue its winning ways this week as earnings season momentum builds. The reporting period is off to a strong start, but this week will be crucial to hopes that real revenue growth has returned, as opposed to earnings surprises resulting mostly from cost-cutting.
Six Dow components and some major banks are among the companies due to report third-quarter earnings. If earnings continue the trend established by early results, investors may keep buying.
"There's enough room for upward movement," said analyst Kim Caughey of Fort Pitt Capital Group in Pittsburgh."Not another 60%, but still enough."
Expectations of economic recovery have fuelled a nearly 60% gain in stocks since the doomsday levels of early March.Last week the Dow gained 3.98% to close on Friday at 9,864.94, its highest in more than a year. The Standard & Poor's 500 rallied 4.51% to 1,071.49, just off a 12-month high, while the Nasdaq composite gained 4.45% to 2,139.28.
But the breathtaking rally has some analysts wondering if the market has too much good news priced in. Analysts'expectations are loftier now, removing one of the catalysts that buoyed the market in the last two reporting periods.
"The concern is heightened by the fact that analysts have been revising estimates up at one of the most aggressive paces in over a year," said Carmine Grigoli, chief US investment strategist at Mizuho Securities USA in New York."This was not the case in the last two earnings reporting seasons, when the market did so well."
Despite revisions in various sectors,earnings are expected to fall more than 25% from a year ago, according to data compiled by Thomson Reuters. Arguably,the bar is still low, even if people have already factored this into projections.
Earnings "should support the market averages where they are and maybe give a minor boost", said strategist Fred Dickson of D.A. Davidson & Co.
Some of the big names scheduled to report this week are Intel Corp and Johnson & Johnson tomorrow, JPMorgan Chase on Wednesday, Goldman Sachs and IBM on Thursday, and Bank of America and General Electric on Friday.
Investors will be watching to see if IBM and Intel benefit from the weak dollar as they earn substantial revenue abroad. IBM is expected to post earnings of $2.38 per share on revenue of $23.38 billion, while Intel is forecast to earn 27 cents a share on $9.015 billion in revenue,according to Thomson Reuters surveys.
Goldman, meanwhile, has continued to increase profits even in tough times,so the others, particularly Bank of America, are better bellwethers. Financials are projected for a 57% increase in earnings from the same period last year,when Lehman Brothers imploded.
"Banks are always important," Mr Grigoli said,"and investors will be looking for signs about loan losses and how fast they are escalating - and whether profits from banks' traditional business are able to offset those losses."
The hope is that upside surprises for banks and the broader market will come from improvement in revenues and not just cost-cutting, said Tobias Levkovich,Citigroup's chief US equity strategist.
Another key driver for the market this week, as in recent ones, will be the dollar.Its weakness (both perceived and real)has lifted the prices of materials, leading in turn to a jump in commodity-related stocks and sector indices.
Key economic indicators are also on tap. September retail sales are due on Wednesday, with an expectation for a 2.1% drop, according to a Reuters poll.But data last Thursday showed samestore sales for September rose for the first time in more than a year, and the market could get an extra boost if retailers keep up the positive news.
The Consumer Price Index for September, due on Thursday, is expected to show a 0.2% rise month over month and a yearly decline of 1.4%.
Six Dow components and some major banks are among the companies due to report third-quarter earnings. If earnings continue the trend established by early results, investors may keep buying.
"There's enough room for upward movement," said analyst Kim Caughey of Fort Pitt Capital Group in Pittsburgh."Not another 60%, but still enough."
Expectations of economic recovery have fuelled a nearly 60% gain in stocks since the doomsday levels of early March.Last week the Dow gained 3.98% to close on Friday at 9,864.94, its highest in more than a year. The Standard & Poor's 500 rallied 4.51% to 1,071.49, just off a 12-month high, while the Nasdaq composite gained 4.45% to 2,139.28.
But the breathtaking rally has some analysts wondering if the market has too much good news priced in. Analysts'expectations are loftier now, removing one of the catalysts that buoyed the market in the last two reporting periods.
"The concern is heightened by the fact that analysts have been revising estimates up at one of the most aggressive paces in over a year," said Carmine Grigoli, chief US investment strategist at Mizuho Securities USA in New York."This was not the case in the last two earnings reporting seasons, when the market did so well."
Despite revisions in various sectors,earnings are expected to fall more than 25% from a year ago, according to data compiled by Thomson Reuters. Arguably,the bar is still low, even if people have already factored this into projections.
Earnings "should support the market averages where they are and maybe give a minor boost", said strategist Fred Dickson of D.A. Davidson & Co.
Some of the big names scheduled to report this week are Intel Corp and Johnson & Johnson tomorrow, JPMorgan Chase on Wednesday, Goldman Sachs and IBM on Thursday, and Bank of America and General Electric on Friday.
Investors will be watching to see if IBM and Intel benefit from the weak dollar as they earn substantial revenue abroad. IBM is expected to post earnings of $2.38 per share on revenue of $23.38 billion, while Intel is forecast to earn 27 cents a share on $9.015 billion in revenue,according to Thomson Reuters surveys.
Goldman, meanwhile, has continued to increase profits even in tough times,so the others, particularly Bank of America, are better bellwethers. Financials are projected for a 57% increase in earnings from the same period last year,when Lehman Brothers imploded.
"Banks are always important," Mr Grigoli said,"and investors will be looking for signs about loan losses and how fast they are escalating - and whether profits from banks' traditional business are able to offset those losses."
The hope is that upside surprises for banks and the broader market will come from improvement in revenues and not just cost-cutting, said Tobias Levkovich,Citigroup's chief US equity strategist.
Another key driver for the market this week, as in recent ones, will be the dollar.Its weakness (both perceived and real)has lifted the prices of materials, leading in turn to a jump in commodity-related stocks and sector indices.
Key economic indicators are also on tap. September retail sales are due on Wednesday, with an expectation for a 2.1% drop, according to a Reuters poll.But data last Thursday showed samestore sales for September rose for the first time in more than a year, and the market could get an extra boost if retailers keep up the positive news.
The Consumer Price Index for September, due on Thursday, is expected to show a 0.2% rise month over month and a yearly decline of 1.4%.
Sunday, October 11, 2009
STRUCTURAL REFORMS URGENTLY NEEDED
Despite upbeat global economic indicators, Thailand could be in for hard times without changes in the way business is done By Nina Suebsukcharoen
"Under the Thai system we say we welcome foreign investment, but our laws block it, if in reality we don't actually obstruct it
Although there are clear signals that the global financial system is improving, and Thailand's institutions also show potential to grow again, there is work to be done yet to ensure a bright future, said Anusorn Tamajai, dean of Rangsit University's Faculty of Economics.
He added that belief that the global financial giants will recover is clearly demonstrated by investor confidence lately in their stocks.On top of this, governments are steadily getting the money they pumped into these institutions back.
This improved outlook of course benefits Thai financial institutions, which have weathered the global economic storm better than some of their counterparts elsewhere because they were not so heavily invested overseas and also had low exposure to collateralised debt obligations (CDOs). These institutions now have the potential to grow due to two key factors - the government's intention to borrow up to 800 billion baht for investment,and the improved performance by some export industries such as cars and electronics.
But while this is very encouraging, Mr Anusorn warned that unless real structural economic reforms are implemented, Thailand may still be in for hard times ahead.
"There have to be financial, regulatory and legal reforms," he said."For example,under the Thai system we say we welcome foreign investment, but our laws block it, if in reality we don't actually obstruct it.
"So this leads to the nominee system, and this sort of system is not straightforward. We say we have opened up, but if that's so we should make it very clear and open up the legal framework.
"We say we have opened up but our laws say there is a limitation. What then happens is that those who want to invest or do business here use the nominee system, and nominees are an avenue to corruption."
Aside from this, tax reform is sorely needed,said Mr Anusorn, who is also director of the Research Center for Economic and Business Reform based at Rangsit. He then identified two objectives in implementing tax reform - to increase the country's competitive edge and to straighten out uneven income distribution.
Although rural people across the world tend to earn less than urbanites, Mr Anusorn noted that in some countries there are better welfare and tax systems in place to alleviate the problem.
He added that a lack of strategic vision was underlined by the Administrative Court injunction on Sept 29 suspending the operating permits of 76 industrial projects in the Map Ta Phut industrial zone in Rayong province.
The government has been faulted for not doing enough to ensure that these big industrial projects had passed proper environmental and health impact screening.
"There are 76 projects worth over 400 billion baht, but definitely for investment and economic growth to be sustainable, development has to be linked to quality of life of local residents and the environment," said Mr Anusorn.
"However, because we don't have strategic and integrated planning, we give the goahead for projects without looking to see whether they should proceed."
He said many of the projects should not have been been allowed in the first place,moved elsewhere or else the laws should be amended to make it clear that it is possible to expand existing industrial parks.
"The court ordered their suspension because there are points which indicate that this cannot be done and people are really affected."
While Mr Anusorn expects the government to find a way to get the projects started again,he noted that the issue has already affected the economy and undermined investor confidence.
"This doesn't mean we shouldn't be concerned about the environment and quality of life. The issue is both legal and regulatory - it has to be cleared up so that this sort of a risk doesn't occur."
He said another example of how good plans can be torpedoed is former prime minister Thaksin Shinawatra's idea to turn Prachuap Khiri Khan into the equivalent of the French Riviera. Today there are plans afoot to locate heavy industries in the province.
Mr Anusorn is mostly against trying to work out a compromise without changes in the legal structure because that would only stretch the problem out, leading to a breaking point.
"As long as you have a structural problem you need structural reform to solve the root of the problem. Constantly compromising won't solve it."
Despite these deep-rooted problems Thailand is expected to post 3-4% economic growth in the fourth quarter of this year, with expansion to continue next year. But Mr Anusorn noted the growth here is the lowest in the region, and said this was because of the chances missed to draw investment when cash was flowing to Asia recently.
"There is room for growth and growth is not a problem in the next six months if there is political stability and government stimulus measures such as Thai Khem Kaeng move ahead according to the plan," said Mr Anusorn.
The Thai stock market is also expected to climb to 800 to 850 points from this quarter onward to the first quarter of next year. This is because not only does the whole bourse lag other Asian markets certain key sectors such as energy, petrochemicals, property and banks also trail.
"But if private investment doesn't revive in the second half of next year when stimulus through government spending starts easing,then the economy will not move ahead,"said Mr Anusorn."The initial assumption is that government spending will occur and will also induce private investment to take place."
Where bonds and fixed-income markets are concerned, interest rates will rise if the economy starts expanding and there is a revival of private investment. Government spending on its own will not push these rates up, but it would prevent them from falling any further, said Mr Anusorn.
"Under the Thai system we say we welcome foreign investment, but our laws block it, if in reality we don't actually obstruct it
Although there are clear signals that the global financial system is improving, and Thailand's institutions also show potential to grow again, there is work to be done yet to ensure a bright future, said Anusorn Tamajai, dean of Rangsit University's Faculty of Economics.
He added that belief that the global financial giants will recover is clearly demonstrated by investor confidence lately in their stocks.On top of this, governments are steadily getting the money they pumped into these institutions back.
This improved outlook of course benefits Thai financial institutions, which have weathered the global economic storm better than some of their counterparts elsewhere because they were not so heavily invested overseas and also had low exposure to collateralised debt obligations (CDOs). These institutions now have the potential to grow due to two key factors - the government's intention to borrow up to 800 billion baht for investment,and the improved performance by some export industries such as cars and electronics.
But while this is very encouraging, Mr Anusorn warned that unless real structural economic reforms are implemented, Thailand may still be in for hard times ahead.
"There have to be financial, regulatory and legal reforms," he said."For example,under the Thai system we say we welcome foreign investment, but our laws block it, if in reality we don't actually obstruct it.
"So this leads to the nominee system, and this sort of system is not straightforward. We say we have opened up, but if that's so we should make it very clear and open up the legal framework.
"We say we have opened up but our laws say there is a limitation. What then happens is that those who want to invest or do business here use the nominee system, and nominees are an avenue to corruption."
Aside from this, tax reform is sorely needed,said Mr Anusorn, who is also director of the Research Center for Economic and Business Reform based at Rangsit. He then identified two objectives in implementing tax reform - to increase the country's competitive edge and to straighten out uneven income distribution.
Although rural people across the world tend to earn less than urbanites, Mr Anusorn noted that in some countries there are better welfare and tax systems in place to alleviate the problem.
He added that a lack of strategic vision was underlined by the Administrative Court injunction on Sept 29 suspending the operating permits of 76 industrial projects in the Map Ta Phut industrial zone in Rayong province.
The government has been faulted for not doing enough to ensure that these big industrial projects had passed proper environmental and health impact screening.
"There are 76 projects worth over 400 billion baht, but definitely for investment and economic growth to be sustainable, development has to be linked to quality of life of local residents and the environment," said Mr Anusorn.
"However, because we don't have strategic and integrated planning, we give the goahead for projects without looking to see whether they should proceed."
He said many of the projects should not have been been allowed in the first place,moved elsewhere or else the laws should be amended to make it clear that it is possible to expand existing industrial parks.
"The court ordered their suspension because there are points which indicate that this cannot be done and people are really affected."
While Mr Anusorn expects the government to find a way to get the projects started again,he noted that the issue has already affected the economy and undermined investor confidence.
"This doesn't mean we shouldn't be concerned about the environment and quality of life. The issue is both legal and regulatory - it has to be cleared up so that this sort of a risk doesn't occur."
He said another example of how good plans can be torpedoed is former prime minister Thaksin Shinawatra's idea to turn Prachuap Khiri Khan into the equivalent of the French Riviera. Today there are plans afoot to locate heavy industries in the province.
Mr Anusorn is mostly against trying to work out a compromise without changes in the legal structure because that would only stretch the problem out, leading to a breaking point.
"As long as you have a structural problem you need structural reform to solve the root of the problem. Constantly compromising won't solve it."
Despite these deep-rooted problems Thailand is expected to post 3-4% economic growth in the fourth quarter of this year, with expansion to continue next year. But Mr Anusorn noted the growth here is the lowest in the region, and said this was because of the chances missed to draw investment when cash was flowing to Asia recently.
"There is room for growth and growth is not a problem in the next six months if there is political stability and government stimulus measures such as Thai Khem Kaeng move ahead according to the plan," said Mr Anusorn.
The Thai stock market is also expected to climb to 800 to 850 points from this quarter onward to the first quarter of next year. This is because not only does the whole bourse lag other Asian markets certain key sectors such as energy, petrochemicals, property and banks also trail.
"But if private investment doesn't revive in the second half of next year when stimulus through government spending starts easing,then the economy will not move ahead,"said Mr Anusorn."The initial assumption is that government spending will occur and will also induce private investment to take place."
Where bonds and fixed-income markets are concerned, interest rates will rise if the economy starts expanding and there is a revival of private investment. Government spending on its own will not push these rates up, but it would prevent them from falling any further, said Mr Anusorn.
Thursday, October 8, 2009
BSEC aims to arrest market-share slide
BFIT Securities (BSEC) expects to regain a market share of one percent this year,said a senior executive.
Rumours that the company would cease operations were not true, he said.BSEC would hold on to its licences.
"We're doing our best to get back to where we used to stand," said Mr Vorakit.
BSEC's market share is down to less than 1% from 5% to 6% early this year.
The March resignation of much of the firm's equity sales (marketing) team had hit revenue, which largely depends on brokerage fees, said Mr Vorakit.
BSEC now has just 30 marketing staff,down from 200 previously.
The company recently recruited seven marketing staff and is looking to hire more to hit 1% market share this year.
The troubled broker faced a scandal in March this year after selling initial public offering shares of Thai Polycons (TPOLY) on the first day of trading. This caused TPOLY's share price to drop,significantly dampening the confidence of investors, and companies planning to list, in BSEC.
The incident led senior executives to resign, taking scores of marketing staff and major clients with them.
"BSEC now has 2 billion baht cash in hand that the company will try to use to create the most revenue in the safest way," Mr Vorakit said."The investment plan is being considered by the company's board."
The firm has tried to cut costs and now focuses on internet trading in preparation for the future liberalisation of the securities industry.
Shares of BSEC closed yesterday at 1.53 baht, down 3 satang, in trade worth 11.428 million baht.
Rumours that the company would cease operations were not true, he said.BSEC would hold on to its licences.
"We're doing our best to get back to where we used to stand," said Mr Vorakit.
BSEC's market share is down to less than 1% from 5% to 6% early this year.
The March resignation of much of the firm's equity sales (marketing) team had hit revenue, which largely depends on brokerage fees, said Mr Vorakit.
BSEC now has just 30 marketing staff,down from 200 previously.
The company recently recruited seven marketing staff and is looking to hire more to hit 1% market share this year.
The troubled broker faced a scandal in March this year after selling initial public offering shares of Thai Polycons (TPOLY) on the first day of trading. This caused TPOLY's share price to drop,significantly dampening the confidence of investors, and companies planning to list, in BSEC.
The incident led senior executives to resign, taking scores of marketing staff and major clients with them.
"BSEC now has 2 billion baht cash in hand that the company will try to use to create the most revenue in the safest way," Mr Vorakit said."The investment plan is being considered by the company's board."
The firm has tried to cut costs and now focuses on internet trading in preparation for the future liberalisation of the securities industry.
Shares of BSEC closed yesterday at 1.53 baht, down 3 satang, in trade worth 11.428 million baht.
Sunday, October 4, 2009
Jittery Wall Street girds for corporate earnings season
US stocks could hit more speed bumps this week if the start of the third-quarter earnings season offers little evidence that the economic recovery is gaining strength.
With second-quarter earnings having been boosted primarily by cost-cutting,investors want to see if the latest quarterly results will show an improvement in revenues. That's a priority for investors because revenue growth is deemed a crucial indicator of consumer and corporate spending.
The aluminium company Alcoa Inc,a Dow component, is scheduled to report on Wednesday, marking the unofficial kickoff of the season. Other marquee names on the calendar are PepsiCo, Yum Brands Inc, Costco and Monsanto Co.
Investors are clamouring for more solid signs of economic stability after the Standard & Poor's 500 has climbed 51.5% from a 12-year closing low on March 9.
By that score, the latest quarterly earnings are a high-stakes endeavour,with investors saying to Corporate America:"Show us the money."
"Earnings have to be good enough to justify the run-up we've had," said William Rutherford, president of Rutherford Investment Management in Portland, Oregon."We haven't got all the problems solved by any means. We're still going to see bumps along the way."
Indeed, surprisingly weak economic reports last week gave investors a cold reminder that the recovery will not be without hitches, even with the massive stimulus from the government.
On Friday, the government's nonfarm payrolls report showed that US employers shed far more jobs in September than expected. The data put the stock bulls on the defensive. And this week could be just as daunting if there are few positive surprises.
The Dow slid 1.84% last week to close on Friday at 9,487.67, a second straight weekly loss after the indices hit 11-month highs in September. The Nasdaq sank 2.05% to 2,048.11 and the S&P slid 1.84%to 1,025.21.
Thomson Reuters data show that third-quarter earnings are forecast to drop 24.7% from a year earlier, a projection that gives companies a low hurdle to overcome following a surprisingly improved second quarter.
"The next big thing we're going to talk about is earnings," said Ryan Detrick,senior technical strategist at Schaeffer's Investment Research in Cincinnati."Usually after the first couple of days,you get a feel as to what the overall trend is going to be."
More takeover deals could also dictate this week's market action. A flurry of takeovers over the last two weeks has dominated the headlines as companies jostle to bolster their revenue streams in an uncertain economy.
"With many companies' growth challenged, we are seeing the tip of the iceberg in M&A," said Scott Billeaudeau, portfolio manager at Fifth Third Asset Management in Minneapolis.
Notable deals last week included Xerox's planned purchase of Affiliated Computer Services. And on Thursday,the Mexican brewer and bottler Femsa said it was in talks with several companies about a possible deal for its beer business.
The economic calendar is light. But today the spotlight will be on the Institute for Supply Management's September index of activity in the services sector.According to a Reuters poll of economists,the ISM non-manufacturing index, or services index, is forecast to have rebounded to 50.0 after hitting 48.4 in August.
Investors also will pay attention to monthly sales reports, due on Thursday,from major retailers to assess how consumers are faring as the job market remains weak.
Federal Reserve chairman Ben Bernanke will also be on centre stage with a scheduled speech on the central bank's balance sheet before a conference in Washington on Thursday.
With second-quarter earnings having been boosted primarily by cost-cutting,investors want to see if the latest quarterly results will show an improvement in revenues. That's a priority for investors because revenue growth is deemed a crucial indicator of consumer and corporate spending.
The aluminium company Alcoa Inc,a Dow component, is scheduled to report on Wednesday, marking the unofficial kickoff of the season. Other marquee names on the calendar are PepsiCo, Yum Brands Inc, Costco and Monsanto Co.
Investors are clamouring for more solid signs of economic stability after the Standard & Poor's 500 has climbed 51.5% from a 12-year closing low on March 9.
By that score, the latest quarterly earnings are a high-stakes endeavour,with investors saying to Corporate America:"Show us the money."
"Earnings have to be good enough to justify the run-up we've had," said William Rutherford, president of Rutherford Investment Management in Portland, Oregon."We haven't got all the problems solved by any means. We're still going to see bumps along the way."
Indeed, surprisingly weak economic reports last week gave investors a cold reminder that the recovery will not be without hitches, even with the massive stimulus from the government.
On Friday, the government's nonfarm payrolls report showed that US employers shed far more jobs in September than expected. The data put the stock bulls on the defensive. And this week could be just as daunting if there are few positive surprises.
The Dow slid 1.84% last week to close on Friday at 9,487.67, a second straight weekly loss after the indices hit 11-month highs in September. The Nasdaq sank 2.05% to 2,048.11 and the S&P slid 1.84%to 1,025.21.
Thomson Reuters data show that third-quarter earnings are forecast to drop 24.7% from a year earlier, a projection that gives companies a low hurdle to overcome following a surprisingly improved second quarter.
"The next big thing we're going to talk about is earnings," said Ryan Detrick,senior technical strategist at Schaeffer's Investment Research in Cincinnati."Usually after the first couple of days,you get a feel as to what the overall trend is going to be."
More takeover deals could also dictate this week's market action. A flurry of takeovers over the last two weeks has dominated the headlines as companies jostle to bolster their revenue streams in an uncertain economy.
"With many companies' growth challenged, we are seeing the tip of the iceberg in M&A," said Scott Billeaudeau, portfolio manager at Fifth Third Asset Management in Minneapolis.
Notable deals last week included Xerox's planned purchase of Affiliated Computer Services. And on Thursday,the Mexican brewer and bottler Femsa said it was in talks with several companies about a possible deal for its beer business.
The economic calendar is light. But today the spotlight will be on the Institute for Supply Management's September index of activity in the services sector.According to a Reuters poll of economists,the ISM non-manufacturing index, or services index, is forecast to have rebounded to 50.0 after hitting 48.4 in August.
Investors also will pay attention to monthly sales reports, due on Thursday,from major retailers to assess how consumers are faring as the job market remains weak.
Federal Reserve chairman Ben Bernanke will also be on centre stage with a scheduled speech on the central bank's balance sheet before a conference in Washington on Thursday.
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)).
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)).
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