August 2010
Market review
The SET index posted its highest monthly gain since December 2007 in July, supported by
increased confidence in the economic outlook. Foreign inflows lifted the market, with net
buying worth 6.88 billion baht. June economic data remained largely robust: exports surpassed
expectations, rising 46% year-on-year, while imports increased 38%. Tourist arrivals rebounded
by 13.7% from a year earlier to reach 7.5 million visitors during the first half. Meanwhile,
consumer confidence strengthened for a second month in June. As a result, the Finance
Ministry upgraded its full-year growth forecast to 5-6%. Although inflation remained subdued,
the Bank of Thailand raised interest rates by 0.25-percentage points to 1.50%, its first rate hike
in two years.
Meanwhile, following May’s fatal protests in Bangkok, a superficial calm has returned to
the country, with many provinces still under a state of emergency, and as the government
continues to round up ‘red-shirt’ leaders under emergency detention legislation.
Portfolio Review
During the month, we took profits in Hana Microelectronics and Siam Makro following strong
share price rises. We introduced property developer LPN Development instead, which focuses
on mid to low-end housing, on the back of an attractive valuation and solid fundamentals.In general, our holdings reported robust second-quarter results: Siam Cement was aided by
its paper business and volume growth from its new chemicals complex; PT Exploration and
Production benefited from increased sales volume and prices, while Phatra Securities and
Siam City Cement also saw improved earnings. Meanwhile, Kasikornbank, Siam Commercial
Bank and TISCO Financial expect loan growth to meet full-year targets. In other news, Toyota
Motor’s plan to invest up to four billion baht to expand capacity bodes well for parts suppliers
Goodyear (Thailand) and Thai Stanley Electric.
Outlook
The rebound in exports combined with government spending across the economy has provided
solid earnings growth. Recent political violence may have unsettled some foreign investors,
but generally the country’s fundamentals appear strong, hence the central bank’s upward
revision of growth forecasts. Notably, our holdings have posted very positive earnings growth,
underlining their resilience. As such, we remain comfortable with their long-term prospects.
Source: Monthly Factsheet Aberdeen Asset Managers Limited