SET expected to reach 970 by July 2008

SET expected to reach 970 by July 2008
Bangkok Post (19 October 2007)

Citi sees political stability as the key The Stock Exchange of Thailand could reach 970 points by July 2008 once political uncertainties are settled, according to Citigroup. The US financial services giant is bullish on the Thai market and recommends investors overweigh the energy and banking sectors. Nithi Wanikpun, director and head of research in Thailand for Citi Investment Research, said the price-to-earnings ratio of the Thai market at 12 times was below the regional average of 15. Earnings growth in 2008 was expected to pick up to 15%, he said. Foreign investment interest had also picked up, with inflows of $3 billion last week. Mr Nithi said there were several positive factors that would drive Thai shares to rise over the next 12 months, led by the prospects of increased political stability following the December elections. He said investors should monitor the application process for party candidates in mid-November. After the Dec 23 election, the next milestone would be the Senate elections in January and the formation of the next government by March. Mr Nithi said the appointment of General Anupong Paochinda as the new army chief, and his statements vowing no new military intervention in the political process, had also helped confidence. ''We believe the appointment is positive for the market and should help brighten up the path to full democracy in Thailand,'' Mr Nithi said. He said that at a recent Citi roadshow in the US and Europe, investors also were interested in the country's ability to withstand a new global economic shock. Mr Nithi said structural reforms for the Thai banking system and low corporate debt would help the economy withstand a global downturn. Citi Investment Research meanwhile projects the baht to further appreciate against the US dollar due to the strong current account surplus. Mr Nithi said it was possible that the new government would scrap the 30% reserve requirement on capital inflows, noting that Democrat Party leader Abhisit Vejjajiva had already pledged to do so to help restore foreign investor confidence. The Bank of Thailand announced the 30% reserve requirement on inflows in mid-December to reduce short-term capital movements and slow the appreciation of the currency. Mr Nithi said a stronger baht was not necessarily negative for Thailand, as it would help reduce costs for imported oil. Foreign direct investment meanwhile remained strong in the auto, electronics and petrochemical sectors, he said. Citi Investment Research tracks 45 stocks on the SET representing 90% of total market capitalisation. The brokerage house recommends investors focus on the energy and banking sectors, lead by PTT Plc, PTT Chemical, Bangkok Bank, Krung Thai Bank and cellular phone leader Advanced Info Service.