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Limited correction seen for Thai shares

BANGKOK: Volatility in regional markets and worries about a U.S. rate hike are expected to prompt a limited short-term correction in the Thai stock market this week.

On Friday the composite SET index finished down 7.72 points or 1.59 percent at 478.92 in active turnover of 8.36 billion baht. It was up 0.96 percent on the week.

"The market is likely to be sluggish as most investors will be paying attention to the outlook for U.S. interest rates," said Padermpob Songkroh at Jardine Fleming Thanakom Securities.

The uncertainty about U.S. rates would make investors wary of long-term investment in the Thai market and the focus would be on speculation in individual stocks, he said.

The U.S. Federal Open Market Committee will meet on monetary policy on February 1 and 2. It is expected to raise interest rates significantly this year to counter inflationary pressure.

But most analysts expect the Thai index to test key resistance at 500 in coming weeks, helped by a resumption of interest in bank shares.

"Bank shares will resume their uptrend. That will propel the market to 500," said Eric Hollman, head of institutional dealing at SG Asia Credit Securities.

Weerachai Krongsamsri at Adkinson Securities said the Thai market should be able to maintain its upward momentum if it could hold above key resistance at 480 and 485.

Having gained 23 percent in the past month, the banking index dropped 3.62 percent to 313.00 on Friday after Thai banks reported heavy net losses for 1999 to set aside money to cover bad or doubtful loans.

Banking analysts said the outlook for banks this year was positive given moves to restructure non-performing loans and higher rate spreads.

Analysts said foreigners had recently started increasing their exposure in regional markets, especially Malaysia and Thailand, and the inflows were likely to continue.

"We saw some capital inflows from foreigners last week. I think we will continue to see that," said Hollman at SG Asia.

Foreigners were net buyers of 1.34 billion baht of Thai shares from Monday to Thursday last week having sold a net 1.16 billion baht the previous week.

Analysts forecast strong speculative buying in a wide range of sectors, particularly energy and chemicals.

Energy and chemical shares were boosted last week by an uptrend of domestic demand and rises in global prices.

The energy sector gained 20 percent over the week, but fell 0.26 percent on Friday.

Chemical shares were up 2.7 percent on the week, but lost 1.29 percent on Friday.

Analysts expect some money to flow into telecommunication stocks given optimism about Internet-related business.

Communications shares fell 0.46 percent on Friday.

Analysts said the uptrend of global oil prices would have a negative psychological impact on the market.

"If domestic oil prices rise in line with global markets, it will affect the market. But the current strength of the baht helps ease the concerns for the moment," said Weerachai at Adkinson.-Reuters