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SIAM INVESTMENT FUND II Bangkok : November 2002. 2 Contents Stockmarket : Recent Performance Stockmarket : Current Considerations Stockmarket : Outlook.

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Presentation on theme: "SIAM INVESTMENT FUND II Bangkok : November 2002. 2 Contents Stockmarket : Recent Performance Stockmarket : Current Considerations Stockmarket : Outlook."— Presentation transcript:

1 SIAM INVESTMENT FUND II Bangkok : November 2002

2 2 Contents Stockmarket : Recent Performance Stockmarket : Current Considerations Stockmarket : Outlook Economy : Recent Performance Economy : Challenges Economy : Outlook Politics

3 3 Stockmarket : Recent Performance SET Index retreating after impressive gains SET Index rose 60% from November 2001 low to June 2002 high Index has dropped 20% from June 2002 high, but is still up 12% year to date. Profit taking spurred by declines in overseas markets, in turn reflecting global uncertainties (such as Iraq, oil prices, U.S. “double dip”)

4 4 Stockmarket : Recent Performance (cont.) Favourable performance comparisons Thai market was late in peaking Strong relative performance, year to date

5 5 Stockmarket : Recent Performance (cont.) IBES consensus forecast changes for Thailand Source: SG Research Index peak coincides with peak in upward revisions of consensus earnings Strong up-trend in forecasts through 1H 2002

6 6 Stockmarket : Recent Performance (cont.) Equity Buying and Selling Activity Foreign investors bought steadily in 1H. Have sold steadily since June. Local institutions held steady until June, then accumulated. Retail investors sold into strength in 1H.

7 7 Stockmarket : Recent Performance Variations in sector performances Building Materials lead the larger sectors with 84% gain ytd Property, Chemicals and Transportation excel Telecoms continue to lag on competition/regulatory (concession) concerns, while agribusiness is hit by EC ban on Thai shrimps. “Techs” also lag. Banks disappoint while defensive sectors (energy/commerce) also sluggish

8 8 Stockmarket : Current Considerations Non-bank earnings have typically exceeded expectations (in 1H), leading to an upward shift in consensus forecasts Earnings surprises have been in margin improvement rather than top line growth (see table below) Deposit rates were cut in October (by 25 bps) bringing the 3m fixed deposit rate down to 1.75%. Interest rates expected to remain low Large Privatisations have stalled (a disappointment after the success of PTT) Oil prices are high (with war premium) External economic environment remains weak, undermining Thai export outlook Flooding to impact Q4 economic performance Scope for economic growth to moderate in 2003, raising specter of downward revisions in earnings forecasts Favourable valuation and liquidity backdrop, but lacking a catalyst for a sustained rerating

9 9 Stockmarket : Current Considerations (cont.) PEs and Yields are attractive Favourable regional valuation comparison Market Valuation

10 10 Stockmarket : Outlook Limited downside with scope to move higher While we see limited sustained share price momentum in either direction, near term, we see scope for the SET Index to trend higher in A still favourable economic growth outlook (absolute and relative), a benign interest rate environment and modest stock valuations outweigh, in our view, concerns over growth disappointments in the major economies and potentially sluggish overseas stockmarkets. The war threat (Iraq) has subsided, but will likely re-emerge in early This could well result in a degree of volatility. Market downside, however, looks limited barring an extreme scenario.

11 11 Economy : Recent Performance Steady pick up in economic activity from 2H 01 2Q 02 GDP growth reaches 5.1% YoY Growth led by domestic demand Economic recovery continues

12 12 Economy : Recent Performance (cont.) 38% growth vehicle sales (Jan-Sept.) Boosted by easier access to (low-cost) credit Housing sales boosted by lower mortgage costs and easier access to loans Cement demand up on increased construction activity Consumer confidence index at 12 month highs Positive trends in domestic spending

13 13 Economy : Recent Performance (cont.) Trade activity picks up, but from a low base Exports hit 22 month high in September Improvement in Trade

14 14 Economy : Recent Performance (cont.) Interest rates remain at historically low levels Interest rates steady for most of the year (after January reduction) BBL initiated a 25bps cut in October, though Bank of Thailand held repo rate steady

15 15 Economy : Recent Performance (cont.) NPLs steady (as of Total Assets) TAMC claims significant progress in debt restructuring Bank Lending shows sign of picking up in Q3 Bank NPLs steady while loan growth picks up

16 16 Economy : Recent Performance (cont.) Monthly economic data from Bank of Thailand

17 17 Economy: Challenges Risk of moderating growth in Q and 4Q economic performance to be hit by widespread flooding Export recovery may prove sluggish as major international economies struggle to grow Government spending will have to be reined in as debt levels rise(though fiscal revenues have exceeded targets) Oil prices are at high levels (with war premium) Boom in consumer credit raises spectre of pick-up in problem loans Continued low inflation sparks debate on deflationary threat

18 18 Economy : Outlook Consensus growth of 4.0% - 4.5% in 2002 GDP growth to slow in 2003 Exports and domestic consumption to remain important drivers Subdued inflation and interest rates

19 19 Politics PM aims to cement control in political arena The passage of two bureaucratic reform bills in August paved the way for a cabinet reshuffle. Six new ministries created PM’s influence extends into military promotions Democrat Party fails to present itself as a credible opposition. Next election expected in late 2004


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