Bangkok--10 May--SCB
Siam Commercial Bank expects the SET Index to adjust up to 1,070 - 1,100 points prior to the May election, with the commercial and media sectors outperforming the SET due to spending of about 20-30 billion baht related to the pre-election rally period. However, the SET could drop to 1,000 points after the election due to uncertainties arising from the election outcome and external events, particularly the end of the Fed's QE2 measure. SCBS expects no change in the SET Index target of 1,200 points by year-end, while short-listing KTB, BLA, MAKRO, HMPRO, BANPU, TOP, and SCC as top picks for domestic and commodity play for 2Q11.
Speaking about the Thai stock market, SCB Securities Research Group Managing Director Mr. Kiattisak Jenwipakul predicted that Thai stocks will continue their upward trend, but more moderately compared with 2010. Unpredictable external events occurring in 1Q11, such as geopolitical tension in the Middle East and the earthquake/tsunami/nuclear power plant crisis in Japan, have had a mixed impact on the performance of Thai listed companies. However, impacts from the upcoming election in 2Q11 will be more significant. Observation of past elections reveals short-term SET rallies of between 2-6%, depending upon the political situation at the time and the expectations for the election outcome. Applying this range suggests a SET index level of 1,070-1,110 during this quarter.
Mr. Kiattisak also noted that with the prolonged tension in the Middle East and the expiry of the relaxation of monetary policies by the U.S. Federal Reserve Bank and European Central Bank, an integral factor backing asset prices during the last two years, outlook for 3Q11 is quite gloomy. Looking forward, we expect more stock, commodity, and bond price volatility before the market re-balances to the 1,000 point level in 3Q11. Mr. Kiattisak concluded that with the not so significant impacts to performance of listed companies, SCBS maintains its projection of the SET Index at the 1,200 point level at the end of the year.
From a sectoral perspective, Mr. Sukit Udomsirikul, Senior Vice President - Retail Strategy Department, Research Group of SCB Securities added that ICT, Autos, Entertainment, Property, Hotel, Banking, Food, and Transportation outperformed the SET during the past three elections. For the upcoming election, we expect the Commerce and Media sectors to outperform the SET index, backed by spending of an estimated 20-30 billion baht throughout the country during the election.
SCBS's top picks for 2Q11 include both domestic (pre-election favorites) and commodity (beneficiaries of supply chain disruptions) plays. For domestic plays, SCBS picks: 1) Krung Thai Bank (KTB), 2) Bangkok Life Assurance (BLA), 3) Siam Makro (MAKRO), and 4) Home Products (HMPRO). For commodity plays, the Company chooses: 1) Banpu (BANPU), 2) Thai Oil (TOP), and 3) Siam Cement (SCC).