Stocks surge, despite remaining uncertainty

Investors applaud election result

Stocks surge, despite remaining uncertainty

KRISSANA PARNSOONTHORN & NUNTAWUN POLKUAMDEE

Thai stocks surged 3.65% yesterday as investors welcomed Sunday's successful polling results even as it remains uncertain who will form the next government.

The Stock Exchange of Thailand index closed at 843.28 points, up 29.68 points, in trade worth 19.31 billion baht. Energy stocks jumped 5.31%, bank shares rose 3.69% and information and communication technology stocks gained 5.78%.

Retail investors were net sellers of four billion baht worth of stocks, while foreign investors had a net buy position of 1.2 billion and local institutions were net buyers of 2.79 billion.

Analysts said the gains were led by foreign buying in energy and large-cap stocks. Retail investors also speculated heavily in telecom stocks linked to former prime minister Thaksin Shinawatra and his family in anticipation that the People Power Party, formed from former members of the Thai Rak Thai party he founded, would form the new government.

But analysts cautioned that the market rebound could be short-lived, at least until the the Election Commission formally announces the the results of Sunday's poll next week.

''We still need to wait and see whether there will be many yellow or red cards,'' said Kosin Sripaiboon, research manager of UOB Kay Hian Securities.

The Election Commission has set Jan 13 for byelections in constituencies where election violations have been detected. The PPP is expected to form the new government with 233 seats, just eight short of a majority and well ahead of the 165 seats captured by the Democrat Party.

''I think, however, that regardless of whether it's PPP or the Democrats, political stability remains fragile,'' Mr Kosin said.

''The new government will be under considerable pressure and might have a honeymoon period of just one or two years before facing problems.''

Mr Kosin said yesterday's market gains also reflected window-dressing by institutional investors ahead of the New Year holiday.

Market sentiment also turned bullish on speculation that Thailand's credit rating could be raised next year with the return to a democratic government.

Standard & Poor's said on Monday that a return to a ''more predictable policy environment will help pave the way for a restoration of investor confidence''. The US agency also cautioned, though, that a continuation of the political divisions that have marked Thailand since 2006 would only further prolong economic weakness and undermine sovereign credit fundamentals.

Kongkiat Opaswongkarn, the president of Asia Plus Securities, said he was confident that market sentiment would continue to improve as investors gained more confidence in the country's political direction.

''The country is going to have a democratically elected government soon, no matter which party will form the coalition government,'' he said.

''The new government should have a strong economic team and seriously consider new stimulus policies that will boost economic activity. The Thai economy has faced setbacks for over a year due to political uncertainties.''

Most analysts project economic growth this year at 4.5%, down from 5% last year. Growth is expected to rebound to 5% in 2008 thanks to improvements in consumer spending and investment, assuming that political and social tensions ease with the new government.

Among most active stocks yesterday, PTT gained 22 baht to 368, PTT Exploration and Production rose nine to 157 baht and Banpu rose 22 baht to 404.

Companies in the Shin Group also posted hefty gains, on speculation that a PPP-led government would benefit the conglomerate founded by Mr Thaksin but sold off to Singapore's Temasek Holdings in January 2006.

Advanced Info Service rose 7.69% to 98 baht, Shin Satellite gained 9.09% to 10.2 and Shin Corp rose 3.24% to 25.5. The property developer SC Asset gained 23.76% to close at 12.50 baht.

Two companies linked to the Wongsawat family, the in-laws of Mr Thaksin, also posted major gains. M-Link Asia jumped 22.73% to close at 1.35 baht while International Engineering gained 22.4% to close at 1.53 baht.