Volatility, political turmoil are this year riks, analysts say

Below are the views from four brokers on the stock market's outlook for this year.

 Adipong Puttarawigorm, executive vice president of Merchant Partners Securities, predicts the SET index will dip under 380, which was the bottom for 2008, heading towards 300, while the index could also climb to about 450. The global reces¬sion this year will inevitably affect the economy.

It is not easy for the new govern¬ment to make the economy turn around as its key job is only to keep the economy from contracting too much.

The government must have con¬crete measures to stimulate key sec¬tors, including property and agricul¬ture.

The SET index will fall to its nadir in the first or second quarter, while the bottoming of the global econo¬my could be towards the end of this year or early 2010.

It's unlikely that the "January Effect" would be replayed this year, as foreign funds including hedge funds have suffered deep losses and won't flow back into the Kingdom.

Investors must be selective in picking stocks. The financial, ener¬gy, auto, property and steel sectors are the most affected by the economic crunch, while entertainment and commerce are likely to be sustained.

Kavee Chukitkasem, assistant managing director of Kasikorn Securities, forecasts the stock mar¬ket going through volatility during the first half as the economy is expect¬ed to move towards recession.

The SET index in the first half will undergo a big cor¬rection from nega¬tive news of the credit crunch, with the real sector facing a lack of liquidity.

The Thai economy, in particular, will experience tight liquidity due to the lack of capital inflows, while the dollar is expected to appreciate dur¬ing the first half.

The SET index will be rangebound between 380 to 565. The index won't plunge below 380 since the economic situation is expected to be stable in the second half with cap¬ital flowing back to emerging mar¬kets and the dollar start¬ing to depre¬ciate.

Domestic political turmoil will settle down after the first quarter and the government's economic stimulus measures are likely to be effective.

The energy sector is still attractive for investors to gradually accumulate with less downside risk. With the weaker dollar outlook, the energy sector is likely to recover, while oil prices are unlikely to fall much fur¬ther.

Banking stocks are still at risk from lower lending growth and high¬er nonperforming  loans.

Other interesting sectors are communications and entertain¬ment.

Therdsak Thaveeteeratham, head of research at Asia Plus, sees the SET index reaching 471.84 points with earnings per share contracting 7.79 per cent. The pricetoearnings ratio will be around 6.53 with pricetobook value at 0.8.

Corporate earn¬ings as well as divi¬dend payouts will fall as many indus¬tries are planning to reduce production due to the rapid decline of external demand, particularly in the petro¬chemical, refinery and steel indus¬tries.

Bank lending growth this year will slow to only 6 per cent from the ear¬lier forecast of 10 per cent due to the economic slowdown.

Investors should underweight the banking sector and avoid the ener¬gy, tourism and electronic sectors which have been affected by the economy. "Neutral" is recommend¬ed for construction materials.

According to data over the past 10 years, the players that always beat the market are Advanced Info Service, BEC World, Siam City Cement, Banpu and Dynasty Ceramic.

Pichai Lertsupongkit, senior vice president of Thanachart Securities, says his company's partner, BNP Paribas Peregrien, expects GDP to shrink by 2 per cent.

However, Pichai believes the economy will grow a mere 0.8 per cent, while global economic growth will be only 2 per cent. Earnings per share of listed firms will dive 18 per cent.

Investors still need to keep an eye on the domestic political situation.

"We have a quite negative view on the Thai stock market due to both external and internal factors. The SET index is expected to reach 480 this year," Pichai said.

Despite lowerthanfundamental stock prices, the profitability of list¬ed companies is low or even negative in some sectors. Thus, overall stock prices are likely to fall fur¬ther.

Steel, petrochemicals and com¬modities should be avoided, while defensive stocks make sense in these times.