Stock Outlook

 Call for caution as downside risk greater this week

Therdsak Thaveeteeratham,

Senior Vice President, Asia Plus Securities

Asia Plus Securities believes the impact of recent fluctuations in overseas bourses, particularly on Wall Street and in Europe, will decline as the proportion of stock traded by foreign investors has halved from its 1997 peak of 43 per cent to 21 per cent early this year.

The SET index this week is expected to move between 430 and 450 points. Outperformers will be small to mediumsized market capitalisation stocks with strong financial positions, promising business outlooks and high dividend plays.

Among these stocks are LPN Development (LPN, fair value Bt3.49), Home Product Centre (fair value Bt4.60) and Sansiri (fair value Bt2.61).

LPN is expected to deliver 7percent growth in its 2009 earnings. It has up to Bt1.7 billion in cash - enough to see a business through the crisis. Its dividend yield stands at 17 per cent per annum.

Home Product Centre is expected to show 10percent growth in its 2009 and 2010 earnings, driven by its plan to open four more outlets in each year. Its cash flow is relatively strong at more than Bt2 billion. We predict a dividend yield of 6 per cent to 7 per cent a year.

Sansiri is expected to see record earnings in 2008 after realising strong sales of its Sereis Condo One project. We estimate a dividend payment of Bt0.22 per share, representing a 10 per cent annual yield.

Kavee Chukitkasem,

Assistant managing director, Kasikorn Securities

We expect the SET index to trade sideways down between 429 and 442 this week. Investors will be concerned with local politics again, as the redshirts plan an antigovernment protest tomorrow. Moreover, concerns over the success of the Asean Summit in Hua Hin this coming weekend will keep investors waiting on the sidelines.

While we do not expect them to have a huge impact on the market, these concerns will limit the SET index's upside.

Many earnings results are expected this week but they will not have a major impact on the overall market as bigcap companies such as PTT, Siam Cement and Advanced Info Service have already announced. However, investors could speculate on highdividend stocks, which are usually announced with earnings results. Moreover, as the baht depreciates against the US dollar, we recommend the export sector, but only food exporters Charoen Pokphand Foods and Thai Union Frozen Products.

 As the SET index is currently trading at around 440, the downside risk is greater than the upside gain. We recommend investors trim their portfolios and wait to buy back at 400.

We maintain our overweight recommendation on domestic plays as core holdings. We prefer the commerce (CP All, fair value Bt12.2), media (BEC World, fair value Bt27.5), ICT (AIS, fair value Bt89.8), contracting (SinoThai Engineering and Construction, fair value Bt3.59), hospital (Bangkok Chain Hospital, fair value Bt9.6) and utilities sectors (Thai Tap Water Supply, fair value Bt5.2).

Sukit Udomsirikul,

Assistant managing director, Siam City Research Institute

We forecast the SET index will fall below 430 points, as the recession is more serious than expected. The recession in developed countries have had an adverse impact on exportdependent countries, including Thailand, which witnessed a 26percent plunge in exports yearonyear in January.

Problems at US financial institutions and automakers have not been resolved yet. It is highly possible that Washington will have to bail out the auto sector and nationalise some ailing financial institutions. Shortterm impacts would be felt on Wall Street if it did so.

The 104 listed companies that had announced fourthquarter earnings by last week posted a 220percent drop yearonyear. Oil firms and refiners reported significant losses, while the firstquarter outlook remains bleak. Therefore, concerns over declining earnings will depress the stock market.

Factors to watch this week:

Thailand's fourthquarter GDP: We estimate GDP will have contracted 3.2 per cent yearonyear.

The Monetary Policy Committee's meeting: We expect the oneday repurchase rate will be slashed by a further 50 basis points.