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Foreigners selling likely to push Thai stocks down

BANGKOK: Further selling by foreign investors is expected to push down the Thai stock market this week, despite a bright outlook for earnings of non-finance firms due from mid-February, equity analysts said.

"Foreigners have sold Thai shares since the beginning of this year. The outlook depends on whether foreign investors will return to the market," said Anothai Chengtawan, chief strategist at Thai Sakura Finance and Securities.

Foreigners were net sellers of 1.86 billion baht ($49.7 million) worth of Thai stocks from Monday to Thursday. Year-to-date, they have sold a net 5.62 billion baht worth of Thai shares, having been net buyers of more than a billion baht worth on the first trading day of the year.

According to Lipper Asia Ltd, Asian fund investment in Thailand as of January 31 was up 5.86 percent month on month to $3.82 billion. Investment in the banking and telecommunication sectors was up 11.00 percent and 15.18 percent to $1.29 billion and $593.9 million respectively.

On Friday the composite SET index finished up 4.56 points, or 0.98 percent, at 470.34 in light turnover of 2.58 billion baht, a quarter of that of active trading days. The index was down 1.49 percent on the week.

Although the index closed well above key support at 460, analysts said the foreign outflows had raised questions about whether the recent market uptrend would be sustainable.

Technical analysts said 460 points remained a key psychological level after the index headed upwards from the 367 level on October 22.

They said the index needed to break through key resistance at 475 to continue its upward momentum and faced strong barriers after that at 480 and 500.

"If the index can't stay above 460, there's a high probability it will fall further," Anothai said. He forecast a range between 440 and 483 this week.

But some analysts said market momentum was still upward due to abundant domestic liquidity.

"I don't think the market will reverse its uptrend," said Supakanya Visetbhakdi, senior investment manager at Ayudhya Jardine Fleming Asset Management.

"Domestic institutional funds are waiting to buy stocks below the 460 level. The equity market is a good option for investment right now given low domestic rates," she said.

Supakanya said she had evidence of a net domestic inflow of 270 million baht into an equity fund managed by her company in January and expected more in the next few months.

Analysts said retail investors would pay attention to earnings of non-finance companies, which are generally expected to post impressive earnings for 1999 and to do well in 2000.

They said listed firms in the telecoms, chemical, electronics and entertainment sectors are expected to report better operational profits for 1999 due to growing domestic consumption on the back of economic recovery.

Analysts said any progress in moves by Thai banks' to set up asset management companies (AMCs) would help support the banking sector. Bank shares rose 1.30 percent on Friday but declined 3.2 percent over the week.

Brokers expect state-run Krung Thai Bank to put forward such a plan for cabinet approval in coming weeks.

Another closely watched factor would be a meeting of the Stock Exchange of Thailand's working committee on a securities commission fee on Wednesday.

"It will be positive for securities firms if the exchange agrees on a minimum trading fee of 0.30 percent as requested by most securities firms," said Sukit Udomsirikul, chief strategist for Capital Nomura Securities.

Analysts say securities firms could be hurt by the authorities' plan to cut brokerage fees. In December the exchange came to a preliminary decision to put a 0.25 percent floor on commission fees against a current fixed rate of 0.5 percent per transaction.-Reuters