US budget impasse keeps lid on equity gains

Recap: Worries about automatic US spending cuts of $85 billion that began on Friday plus uncertainty about the future of Federal Reserve stimulus dampened sentiment on Wall Street and affected emerging markets. However, Fed chairman Ben Bernanke's reassurances about his commitment to the quantitative easing plan helped to calm markets.

The SET index rebounded and reached a 19-year record of 1,549.5 points on Friday morning before easing back. For the week the index traded in the range of 1,518.02 to 1,549.82 points and closed at 1,539.8, down 0.03% from the week before, with heavy daily average turnover of 64.5 billion baht.

Foreign investors were net buyers of 3.22 billion baht, putting them back into the net-buy column for the year. Institutional investors were net sellers of 950 million baht, brokers 172 million baht and retail investors 2.1 billion baht.

Big movers: Eureka Design (EUREKA), the maker of assembly and testing machines, made an impressive MAI debut, closing at 6.75 baht against an IPO price of 2.25 baht.

CPALL topped the table in value and closed the week unchanged at 47.75 baht. Union Mosaic Industry (UMI) gained 15.1% to 34.25 baht, the infrastructure and energy company MDX rose 18.8% to 20.20 baht, and BLAND gained 3.9% to 2.12 baht.

Newsmakers: US President Barack Obama officially ordered the start of spending cuts of $85 billion after Democrats and Republicans failed yet again to agree on deficit reduction. The Congressional Budget Office estimates the cuts will slow growth by 0.6% and lead to 750,000 fewer jobs by year-end if the politicians cannot find a solution.

FMr Bernanke said the Fed will continue its quantitative easing measures until unemployment improves, easing concern over the end of QE before year-end. He also said there is no evidence of a US stock market bubble.

- Italy's general election failed to produce any positive results for a public debt solution. Pier Luigi Bersani's centre-left bloc holds the most seats in the Lower House but not in the Senate. Political instability and the possibility that former premier Silvio Berlusconi may yet play a role in a new government have investors fearful of prospects for the euro zone.

- In Thailand, inflation moderated to 3.23% year-on-year last month from 3.39% in January.

- Bank of Thailand data for January showed a sound domestic economy, buoyed by increased private consumption and investment and better business sentiment. As well, high imports signified meaningful improvement in capital goods for future investment. Exports in January rose by 16.1% year-on-year to $18.3 billion and imports 40.9% to $23.8 billion, according to Commerce Ministry data.

- The cabinet approved a 2-trillion-baht transport infrastructure investment plan. Ministers are expected to consider a bill authorising loans amounting to 2 trillion baht in mid-March before sending it to the House in late March.

- SET president Charamporn Jotikasthira warned of an equity bubble, noting 72 stocks now had price-to-earnings ratios exceeding 40 times, double the market average.

- Maybank Kim Eng Securities estimates SET turnover will decline to 50 billion baht a day from 60 billion after TSFC Securities stopped allowing margins last Wednesday.

- The Bank of Thailand said it may revise up its 4.9% GDP growth forecast for 2013 at its next policy meeting on April 3, given the higher purchasing power and investment momentum from last year, while exports have a brighter outlook in the second half of this year.

- The Fiscal Policy Office said the impact of the nationwide daily minimum wage increase to 300 baht, which took effect on Jan 1, drove overall costs of business operators up by 6.4% and increased the number of companies going out of business in last year's fourth quarter by 26.6%, the highest in nine years.

- PTT has delayed scheduled maintenance shutdowns for three gas separation plants in Rayong province to May from February and March to alleviate the impact of the looming gas supply shortage due to maintenance of gas platforms in Myanmar from April 5-14.

Coming up this week: HSBC tomorrow will release its preliminary services Purchasing Managers Index for China for February. The same day, the Australian central bank meets.

- Updated US private-sector employment figures as well as euro zone fourth-quarter 2012 GDP figures will be released on Wednesday.

- The Thailand Consumer Confidence Index will be released on Thursday along with the US Federal Reserve Beige Book report, a closely watched indicator of regional economic conditions.

Stocks to watch: Kasikorn Securities (KSec) recommends buys in ADVANC, AAV and CPF and says investors should avoid speculative stocks.

- Thanachart Securities recommends trading buys in SRICHA, CPALL, SUSCO, INET, TSF and SPCG. For a low interest rate play, it recommends property stocks SIRI, AP and QH and banks including KBANK, KK and TISCO.

Technical view: KSec sees support at 1,518 and resistance at 1,550 points. Finansia Syrus Securities sees support at 1,530 and resistance at 1,550.

About the author

Writer: Darana Chudasri & Nuntawun Polkuamdee