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Global setback in TMT may slow Thai stock recovery

BANGKOK: A global setback in technology, media and telecoms (TMT) stocks is likely to take the shine off what should otherwise be a positive Thai stock market this week.

Sentiment on Thailand was lifted last week after U.S. credit rating agency Moody's Investors Service raised the outlook for all Thai financial institutions to positive from neutral.

But a worldwide reassessment of the valuations of "new economy" stocks, which have powered up in recent months thanks to their association with the Internet, outweighed any local optimism and left the market slightly lower for the week.

On Friday, the composite SET index .SETI finished up 0.73 points, or 0.18 percent, on the day at 400.32 on thin turnover of 3.39 billion baht ($90 million). It lost 0.96 percent through the week and declined 16.93 percent in the first quarter.

Support this week is seen at 396 and 380 points and resistance at 402 and 415, they said. "We expect Thai tech, media and telecoms (TMT) stocks to go down further," said Satit Wannasilpin, head of research at Capital Nomura Securities.

Analysts said the outlook for the Thai market would likely improve on optimism over Moody's. Its decision to raise its outlook for Thai financial institutions implies the next change in their ratings should be upwards.

Finance Minister Tarrin Nimmanahaeminda will hold talks with Moody's officials in Washington in mid-April on the prospects of upgrading the country's sovereign long-term foreign currency rating, Thai officials have said.

RISK OF BANK FAILURE VERY LOW

Many Thai banks still have "junk" ratings but last week's revision confirms that the risk of one of Thailand's surviving banks failing, which was once high, is now very low.

"I am optimistic that Thailand's rating will be upgraded. It is likely to happen, probably in June," said Sriyan Pietersz, head of research at SG Asia Credit Securities.

However, Pietersz said foreign investment could still stay relatively low due to an imminent reweighting in the asset allocation of Morgan Stanley Capital International (MSCI).

MSCI's all country Far East Free ex-Japan index will cut Thailand's weighting to 3.2 percent from 4.2 percent from May 31 when Malaysia is included in the index and Taiwan reweighted.

Foreigners sold a net 17.06 billion baht of Thai shares in the first quarter, partly due to the change, analysts say.

"It should take a little more time before Thailand can attract more interest. Fundamentally, it still looks good," he said.

Analysts said the market was likely to be affected by worries about political uncertainty after the resignation last week of powerful Thai Interior Minister and Deputy Prime Minister Sanan Kachornprasart amid allegations of false asset declarations. He denies any wrongdoing.

The composite index fell below key psychological support at 400 points on Thursday, partly due to worries about the stability of the government, generally seen as "market-friendly", and rumours Prime Minister Chuan Leekpai would call early elections.

"Political issues are likely to be a major factor in the medium term as the next general election is expected to be called in November," said Arparporn Sawaengpak deputy vice president at Nava Vickers Ballas Securities.

Arparporn at Nava said her worst scenario saw the key index finding support at 350 points if polls were held in that period.

Satit at Capital Nomura said his company had recently adjusted its recommendation on Thai telecoms shares to "neutral" from "overweight" given its peak valuations.

However, analysts said they still overweighted electronics stocks like Hana Microelectronics HANA, KCE Electronics-Reuters