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Country Assessment
Regional Equity Strategy Q4 2007
MARKET REVIEW - Continued uptrend despite US sub-prime hiccup
The SET index peaked at 895.63 in late Jul 2007 on easing political risks, but fell in
August on US sub-prime concerns. The Index closed at 802.65 on 17 Sep 2007, up
3.3% QTD. Average daily trading value improved favorably from Bt11.8bn/day in 1Q07
and Bt15.1bn in 2Q07 to as high as Bt21.5bn/day QTD. Foreign investors turned net
sellers of Bt35.4bn worth of shares in August as US sub-prime concerns sparked risk
aversion across the globe and resulted in
Net buy-sell position of foreign investors
global equity sell-off including Thailand.
Btm
SET
QTD, foreign investors are net sellers of Bt8.1bn
80,000
900
Net Foreign
worth of Thai stocks. YTD, foreign investors
60,000 SET Index (RHS)
850
800 net buying amounted to Bt89bn, vs Bt83bn
40,000
750
net buying registered in 2006.
20,000
0
-20,000
-40,000
Jan -05
Mar -05
May -05
Jul -05
Sep-05
Nov -05
Jan -06
Mar -06
May -06
Jul -06
Sep-06
Nov -06
Jan -07
Mar -07
May -07
Jul -07
Sep-07
Source: Stock Exchange of Thailand
As of 17 Sep 2007
700
650
600
550
500
For 2Q07, listed companies reported cumulative
net profit of Bt114.5bn, down 10% from
the same period last year. Meanwhile, 1H07
total net profit fell 17% y-o-y to Bt229.4bn.
The drop in 1H07 net profit was due to (i) higher cost of sales, (ii) lower FX gain due
to the strong baht, (iii) higher loan loss provision by banks to comply with IAS39.
We expect stronger 2H07 results from Thai corporates.
On the economic front, the Thai economy grew 4.4% in 2Q07, a little better than
4.2% growth in 1Q07. 1H07 GDP expanded 4.3%, with exports again the major contributor.
Expansionary fiscal policies also supported the growth momentum, with current spending
and capital expenditures growing 7.4% and 3.1%, respectively. Private consumption
and investment, however, continued to slow in line with falling consumer confidence
and business sentiment index.
On the political front, the draft 2007 constitution was passed during the 19 August
nationwide referendum with 57% voting for the new constitution and 41% against.
His Majesty King Bhumibol Adulyadej endorsed the country's 18th constitution on
24 Aug, and the charter took effect immediately after it was announced in the Royal
Gazette the same day. This is positive news for the market, and should pave the way
for the general election to be held on 23 Dec 2007.
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