Published on February 25, 2008
Given an expected bout of short-term selling in the Thai bourse, dividend plays seem to be the best alternative for stock investors as they have a chance to receive greater yields from falling share prices.
The stock market over the past few weeks has tried to breach the 840-barrier, but failed to do so due to the absence of positive factors and the lingering anxiety over the sub-prime mortgage turmoil and the health of the US economy.
Kim Eng Securities said in a note last week that the Thai stock-market upside appeared to be limited in light of a spate of negative factors, including rising inflation, the US recession concerns and the short duration of the Thai political honeymoon period.
"Political uncertainties relating to poll-fraud cases and the ruling party possibly being dissolved are likely to increase as the new government's short honeymoon nears an end.
"The government has already back-tracked on lifting capital controls and the economy is not expected to benefit significantly from the government's spending policies for at least another six months to a year," the brokerage said.
Ayudhya Securities recommended dividend stocks as an alternative for investors, as declining share prices offer higher dividend yields.
The brokerage forecast that Hana Microelectronics, Vanachai Group, Ticon Industrial Connection and MK Real Estate Development would offer dividend yields in a range of 6.8 to 9.2 per cent. These firms are expected to pay dividends in April and May.
Depositors now receive only 0.75 per cent and about 2.75 to 3 per cent per annum for every Bt100 put in bank savings accounts and three-month term-deposit accounts, respectively.
GMM Grammy, CS Loxinfo, MCS Steel, GMM Media, Supalai and Thanachart Capital are expected to provide interim dividend yields of 5.5 to 6.75 per cent for their financial performance in the second half of 2007, Ayudhya Securities said.
Seamico Securities said attractive dividend plays were Thai Metal Trade at 9.26 per cent, Padaeng Industry with 7.94 per cent, Advanced Information Technology with 7.81 per cent, and Delta Electronics (Thailand) with almost 7 per cent.
Thai Plastic and Chemicals and Oishi Group have yielded 6.34 per cent and 6.2 per cent, respectively.
The brokerage was bullish over the Thai stock market's prospects in the medium term, due to an economic recovery driven by the government's stimulus measures and the improving confidence of the private sector.
A stock-market slump presents an opportunity for investors, the broker said, adding that bank, property developer and communication stocks feature as its top picks.