Market Outlook 09 September 2008
The SET is expected to be volatile, pressured by weaker commodity prices and a political stalemate. On the political front, the Chairman of the Upper House has volunteered to mediate the conflict between the PAD and the Government. However, both parties remain uncompromising on their respective demands - PM Samak persists on retaining his office and proposes a referendum on himself, while the PAD will open to talks only if the PM resigns. Meanwhile, the Cabinet's field trip at the northeastern Udorn Thani province where the pro- and anti-government groups are facing off, may worsen the political situation. In the short term, the SET would go down to 630 points (intra-day support of 640 points). We expect the PM to lift the Emergency Decree, which will be a short term catalyst to boost the SET back to test 660 points. Thus, we recommend trading if the market weakens.
The Government has been increasingly pressured by various groups, while a number of court cases are close to judgments. The best scenario would be the PM dissolving the Parliament, and the PAD disbanding with its leaders surrendering to the Court. If this the case, the SET may surge to test 700 points, led by blue chips (bank, ICT and energy), as a number of stocks have strong fundamental and are resilient to the volatile economy.
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