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Baht/$ 33.68/71
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14,700
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PROPERTY
Property stocks have been downgraded to neutral from overweight on the Stock Exchange of Thailand as the result of rising political uncertainties, according to a research report by CIMB-GK Securities (Thailand) Ltd.
The downgrading of the property sector rating was in line with the brokerage's earlier decision to lower the rating of the Thai stock market to neutral from overweight with a new SET index target of 850, from 950.
The brokerage house kept its earnings forecasts for property stocks under its coverage unchanged but has cut their target prices. The company said it took into account the 10% and 30% cut in its rating of the market and property sector respectively due to rising political uncertainties.
CIMB's economists also cut the GDP growth forecast for Thailand for this year to 5.3% from 5.7%.
The company continues to believe that major property companies are in a position to meet earnings forecasts for this year due to tax incentives and real demand; cost-savings from tax and transfer fee exemptions; and moderate price increases for properties.
However, it viewed that the outlook beyond 2008 is tougher to evaluate as inflation continues to rise, resulting in a margin squeeze, adding that most developers have prepared for the challenge.
Major developers have been more careful about construction-material procurement and project management in an effort to shorten the business cycle. They have also stressed value engineering for high-quality construction structures, lower costs and lager saleable floor areas.
CIMB believed that the property market should remain one of key vehicles for the government to stimulate the economy and said that tax incentives might be extended for another year or so.
The firm did not expect banks to raise their rates aggressively from now due to risks to loan growth.
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