Market Outlook 03 December 2008
The Constitutional Court's judgment on the dissolution of the three implicated political parties has prompted the PAD protesters to exit the two airports as well as the Government house. This would ease the political situation for the short term. Meanwhile, gains in the US stock markets would spark a rally in the SET; we expect resistance at 400 points (next target at 420 points). We recommend trading on blue chips which have dropped significantly – energy (PTTEP, BANPU) – and interest sensitive stocks ( a 0.5% cut in the benchmark interest rate is expected in the MPC meeting today) - property (LH, AP, PS) which would also benefit from the extension of tax rate measures.
However, the Court's verdict did not completely resolve all the underlying political problems, in our view, since the coalition government has retained a majority of seats and is highly likely to join hands in forming a new government. As such, the PAD protest would reemerge and this time may probably be more violent. The pro-government group is planning their counter protests in the meantime. Furthermore, the recent siege of the two airports has caused considerable damage. It may take at least a year to restore investors and tourists’ confidence. Given this together with the global economic slowdown, we expect to see a sharp decline in Q4 economic growth. Thus, we think 2Q09 would be the most suitable time to accumulate stocks.
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