Thailand’s SET May Rise 4.5% Next Week, Bualuang Says (Update2)

Thailand’s SET Index may rise 4.5 percent next week, extending its biggest gain in six years, as individual investors buy more mutual funds to meet a year-end tax deadline, Morgan Stanley’s Thai partner said.

The measure may rise to as high as 760 by the end of the year from yesterday’s close of 727.21, according to Bualuang Securities Pcl, which has a tie up with Morgan Stanley for Thai research. That would be the highest level since July 2008.

“There should be more money inflow into the equity market next week as it’s the last chance for local individuals to buy mutual funds for tax savings,” Pongrat Ratanatavanananda, an investment strategist at Bualuang, said by phone from Bangkok.

The SET has gained 62 percent this year on expectations the economic recovery will boost earnings. Southeast Asia’s second- largest economy shrank 2.8 percent last quarter, the smallest contraction in a year, as it pulls out of the global slump.

Local individuals are expected to invest at least 5 billion baht ($151 million) in mutual funds that provide tax breaks, Tisco Securities Co., Deutsche Bank AG’s partner in Thailand, said in a report on Dec. 22. The gauge today rose 0.4 percent to 730.41, the highest close since Oct. 19.

Thai individuals may invest more in the so-called long-term equity fund and the retirement fund as the government offers tax breaks for as much as 1 million baht on these investments.

More Local Buying

Local institutions, which include mutual fund and insurance companies, bought 484 million baht of domestic stocks more than they sold yesterday, an 14th straight day of net buying, according to the exchange’s data. Overseas investors sold a net 64 million baht of the stocks, the first net selling in three days.

A court decision to lift a suspension on construction for some projects in the Map Ta Phut industrial complex has also “dramatically” boosted investor sentiment, Pongrat said today.

On Dec. 22, Prime Minister Abhisit Vejjajiva said 19 projects of the stalled 65 may be allowed to proceed. The Administrative Court said on Dec. 23 a project of Siam Yamato Steel, an affiliate of Siam Cement Pcl, can proceed because it obtained an environmental impact assessment certificate before the 2007 constitution was promulgated.

Pongrat recommended shares of PTT Pcl and Siam Cement, whose projects have been suspended by the court, on expectations that the court may allow construction of their plants to proceed soon.

China’s Stocks Drop for First Time in Three Days; Zijin Falls

China’s stocks dropped for the first time in three days, paring a weekly gain, on concern new share sales will divert money from existing equities.

Zijin Mining Group Co. and China Shenhua Energy Co., the nation’s largest producers of gold and coal, lost at least 1.3 percent as eight companies debuted in Shenzhen’s ChiNext market for start-up companies today. Pharmaceutical companies Joincare Pharmaceutical Group Industry Co. advanced as investors sought so-called safe havens that aren’t easily affected by the economic swings.

The Shanghai Composite Index fell 12.06, or 0.4 percent, to 3,141.35 at the close. It added 0.9 percent in the past five days, its first weekly gain in three weeks. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, declined 0.4 percent to 3,424.78.

“The market will be in a fluctuating pattern until the end of the year,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million. “The market won’t have a strong performance, unless the government slows down new share sales.”

The Shanghai gauge has rallied 73 percent this year as government spending and a credit boom helped the nation’s economy recover from its steepest slump in more than a decade. The index has dropped 1.7 percent this month as a flood of share sales diverted funds from existing equities and the government raised down payments on land purchases.

Zijin, Jiangxi Copper

Zijin Mining lost 1.9 percent to 9.47 yuan after rising 4.7 percent yesterday. Shenhua fell 1.3 percent to 32.79 yuan. The stock gained 4.8 percent yesterday.

Jiangxi Copper Co., China’s biggest producer of the metal, lost 1.7 percent to 37.93 yuan. Zhongjin Gold Corp., the country’s second-largest bullion producer by market value, slid 2.6 percent to 56.21 yuan.

Eight companies including Jiangsu Huasheng Tianlong Photoelectric Co. and Guangzhou Improve Medical Instrument Co. jumped on the first day of trading in the ChiNext market for technology-heavy start-ups.

They are the second batch of companies that have been listed on the market, adding to the first 28 companies that went public at the end of October. ChiNext has less stringent rules for listing compared with the nation’s two main exchanges.

Mainland companies have raised 194 billion yuan ($28 billion) from initial public offerings this year, 87 percent more than the whole of 2008, according to data compiled by Bloomberg, as an improving economy lures investors.

New Listings

Anhui Xinhua Media Co., the biggest publishing house in the province, said it plans to raise 712 million yuan in an initial public offering in Shanghai to fund its expansion.

Joincare Pharmaceutical advanced 6.3 percent to 12.17 yuan, rising for a fifth day. Zhangzhou Pientzehuang Pharmaceutical Co., a manufacturer of Chinese traditional medicine, gained 3.1 percent to 39.08 yuan. A measure tracking health-care stocks gained 1.5 percent today, the second biggest among the CSI 300’s 10 industry groups.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

China CAMC Engineering Co. (002051 CH) rose 3.4 percent to 25.70 yuan after the company said 2009 net income may rise 30 percent to 50 percent.

Guangdong Mingzhu Group Co. (600382 CH) rose by the 10 percent daily limit to 8.55 yuan after saying it received a 78.8 million yuan dividend payment from Guangdong Dading Mining Co.

Shenzhen Gas Corp. (601139 CH), a supplier of bottled gas, more than doubled to 15.17 yuan in its Shanghai trading debut after raising 903.5 million yuan in its initial public offering.

U.K. Stocks Gain; FTSE 100 Reaches Highest Since September 2008

Dec. 24 (Bloomberg) -- The U.K.’s FTSE 100 Index rose to the highest level since September 2008, with the benchmark gauge extending its biggest annual rally since 1997, as shares of mining companies advanced.

Fresnillo Plc, Rio Tinto Group and BHP Billiton Ltd. gained at least 1.3 percent as metals prices climbed on the London Metal Exchange. RSA Insurance Group Plc, the U.K.’s biggest non-life insurer, led declining shares.

The FTSE 100 gained 30.03, or 0.6 percent, to 5,402.41, bringing this year’s rally to 22 percent. That’s the highest closing level since Sept. 12 last year, the final trading session before Lehman Brothers Holdings Inc. filed for the world’s biggest bankruptcy.

The measure has rebounded 53 percent since March 9 as central banks cut interest rates to record lows and governments worldwide committed about $12 trillion to revive the economy. The FTSE All-Share Index rose 0.4 percent today and Ireland’s ISEQ Index slipped 1.1 percent.

“It’s been a good few weeks” for equities, said Manoj Ladwa, a markets strategist at ETX Capital in London. “Whether momentum can be maintained in 2010 is a tougher question.”

Fresnillo, the world’s largest primary silver producer, surged 6.1 percent to 793.5 pence. BHP Billiton, the world’s biggest mining company, advanced 1.3 percent to 1,970 pence. Rio Tinto, the third largest, gained 2.3 percent to 3,370 pence. Copper, lead, nickel and tin prices climbed in London.

RSA Insurance slipped 1.5 percent to 119.1 pence, leading declining shares on the FTSE 100.

Trading on the London Stock Exchange closed at 12:30 p.m. for the Christmas holiday. All markets in Europe are closed tomorrow and the U.K. market will also be shut on Dec. 28.

European Stocks Advance for Second Week on Economic Recovery

European stocks rose for a second week, with the benchmark Dow Jones Stoxx 600 Index heading for its largest annual increase in a decade, amid signs the global economy is recovering.

Royal Dutch Shell Plc and Total SA led gains among oil producers as crude advanced after stockpiles of the commodity fell more than expected. Allied Irish Banks Plc rallied after saying it is looking at ways to raise capital next year. The Stoxx 600 gained 2.3 percent this past week to 251.9, extending its 27 percent rally this year. Most equity markets across Europe were closed yesterday and all are closed today for Christmas vacation.

A 59 percent surge on the regional benchmark gauge from March has been spurred by record-low interest rates in the U.S. and Europe and by governments worldwide that have committed about $12 trillion to revive credit markets and stimulate economic growth. Sales of existing homes in the U.S. topped forecasts Dec. 22, the latest sign the world’s largest economy is emerging from recession.

“Markets still look to be reasonably good value and we expect profits are going to grow pretty quickly next year,” said Kevin Gardiner, the London-based head of investment strategy at Barclays Wealth, in a Bloomberg Television interview.

Earnings for companies in the Stoxx 600 are expected to climb 29 percent next year, according to data compiled by Bloomberg. That compares with a forecast for a 7.4 percent increase in 2009 profits.

Earnings Growth

European equity strategists said earnings growth can push stocks 11 percent higher in 2010 following this year’s rally, according to a Dec. 22 survey. Goldman Sachs Group Inc. and Bank of America Corp., which underestimated the strength of this year’s gains, predict shares in the region may climb more than 20 percent over the next 12 months. Morgan Stanley is the only brokerage among 16 surveyed by Bloomberg to estimate a retreat by year-end, saying the withdrawal of government stimulus will weigh on equities.

Lower than normal trading volumes this week may continue next week, according to market analyst Cameron Peacock at IG Markets in Melbourne. All western European equity markets will be closed Jan. 1 for a holiday and the U.K. market is closed Dec. 28.

The U.K.’s FTSE 100 climbed 4 percent this week, while France’s CAC 40 rose 3.1 percent. Germany’s DAX gained 2.2 percent as Infineon Technologies AG surged on a revised sales estimate.

Shell

Shell, Europe’s largest oil producer, gained 6.7 percent and Total, the third-biggest, added 5.8 percent. Crude oil climbed as a government report showed a larger-than-expected decline in U.S. stockpiles and amid the latest signs the economy is recovering from its recession. Oil and gas companies rose more than any of the other 19 industry groups on the Stoxx 600.

Sales of existing U.S. homes rose more than forecast in November, to the highest level in more than two years, a National Association of Realtors report showed Dec. 22.

Allied Irish Banks surged 15 percent and Bank of Ireland soared 19 percent, the two biggest movers on the Stoxx 600 this week. Allied Irish shareholders approved its participation in a so-called bad bank that will buy loans from lenders at an average 30 percent discount, reflecting a fall in land values over the past two years. The bank said it may need to rely on the government after it transfers loans to the bad bank. The government already has a 25 percent stake in each of the two largest Irish banks.

Infineon, Debenhams

Infineon Technologies climbed 5.9 percent after Europe’s second-largest chipmaker said revenue will grow by a better- than-expected “high single digit” in the quarter ending Dec. 31 on improved sales in the automotive and industrial units.

Debenhams lost 1.5 percent, paring its rally this year to 234 percent. UBS AG added the U.K.’s second-largest department-store chain to its “least preferred” list of stocks. UBS said “we see a higher risk to Christmas sales performance given the strong showing last year, a mild autumn and the recent cold snap which we think may have affected footfall,” according to a report sent to clients.

U.S. Stocks Rise, S&P 500 Reaches 15-Month High on Commodities

U.S. stocks rose, pushing the Standard & Poor’s 500 Index to a 15-month high, as higher commodity prices boosted metal producers and reports showed the economy is improving.

Alcoa Inc. and U.S. Steel Corp. helped lead a measure of raw-material producers in the S&P 500 up 4.2 percent, the biggest gain in six weeks. American International Group Inc. added 6.9 percent, the most since September, after people familiar with the matter said the insurer halted an initial public offering of its Chartis property-casualty unit.

The S&P 500 rallied 2.2 percent to 1,126.48 this week, surpassing 1,120.84 to recover half its loss from the 17-month bear market that ended in March. The Dow Jones Industrial Average advanced 1.9 percent to 10,520.10. U.S. exchanges closed three hours early yesterday and are shut today Christmas. Trading at the New York Stock Exchange yesterday was the slowest since Dec. 24, 1998, with 319.3 million shares changing hands.

“I’m optimistic on the market, at least for the first half of the year,” said Ethan Anderson, who helps oversee $900 million as a senior money manager for Rehmann in Grand Rapids, Michigan. “Investors and the stock market are making up.”

The S&P 500 has risen five straight days, the longest winning streak in almost two months, after sales of existing homes topped forecasts and consumer spending rose. It has added 67 percent since March after governments around the world enacted stimulus measures and the U.S. lent, spent or guaranteed more than $11 trillion to end the recession. The S&P 500 is up 25 percent this year, the largest annual gain since 2003.

Economic Barometer

The Treasury yield curve, a barometer of the health of the U.S. economy, widened to a record this week as investors bet an accelerating recovery will fuel inflation and hurt demand for unprecedented sales of government debt. The difference between 2- and 10-year Treasury note yields increased to 285 basis points on Dec. 22.

Alcoa soared 12 percent to $16.34 for the biggest gain in the Dow average. Morgan Stanley lifted the largest U.S. aluminum producer to “overweight” on speculation metal prices will keep rallying. U.S. Steel increased 16 percent to $56.86. Copper and oil prices climbed, helping send the Reuters/Jefferies CRB Index of 19 raw materials up 1.7 percent.

“There’s still a lot of buying power out there,” said Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Management in Cincinnati. “It’s a market that’s transitioning from being liquidity-driven to being earnings- driven, and the big search now is for who has got that earnings power.”

No IPO

AIG gained 6.9 percent to $30.12. The company stopped preparations for an IPO of Chartis after Robert Benmosche, who started as AIG’s chief executive officer in August, told employees that he considers the business a core holding, according to two people who declined to be identified because an announcement hasn’t been made.

Economic growth in the U.S. is accelerating even more than previously anticipated as business investment picks up and stockpiles fall at a slower pace, according to economists at Morgan Stanley in New York. The economy is poised to grow at a 5.1 percent annual rate from October through December, according to a revised forecast by Morgan Stanley following the Commerce Department’s report on durable goods yesterday. The new estimate is a percentage point higher than their earlier projection.

Excluding demand for transportation equipment, which is often volatile, bookings for long-lasting goods climbed a greater-than-forecast 2 percent in November, figures from the showed yesterday. Initial jobless claims also fell by 28,000 to 452,000 in the week ended Dec. 19, the fewest since September 2008, according to the Labor Department.

Cintas Corp. tumbled 11 percent to $26.37 for the biggest decline in the S&P 500. The largest U.S. supplier of uniforms reported quarterly earnings that missed the average analyst estimate by 8.7 percent.

Electronics for Imaging, Sunrise, Qualcomm: U.S. Equity Preview

Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Electronics for Imaging Inc. (EFII US): The digital- printing company said its tender offer was oversubscribed and that it had accepted orders to buy about 5.5 million shares at $12.75 a share.

Qualcomm Inc. (QCOM US): The world’s biggest maker of chips for mobile phones said that Len Lauer, chief operating officer, has resigned and accepted a role as chief executive officer at another company.

Sunrise Senior Living Inc. (SRZ US): The manager of retirement communities said its Sunrise Connecticut Avenue Assisted Living unit amended its credit line, making a $5 million payment on the principal of $29.5 million of outstanding borrowings and suspending or amending some covenants.

Dollar to Gain on Fed, European Ratings Concern, Thin Says

Dec. 24 (Bloomberg) -- The dollar will recover against its major counterparts as the Federal Reserve prepares to raise interest rates and European nations face credit-rating reductions, according to Brown Brothers Harriman & Co.

Standard & Poor’s cut Greece’s rating on Dec. 16 to BBB+, three steps above high-risk, high-yield status, and said the ranking may drop further. Concern about a default among the 16 sovereign nations making up the euro area helped push the common currency down from its highest this year against the greenback.

“Portugal, Italy, Greece and Spain are really coming under stress,” Win Thin, a senior currency strategist in New York at Brown Brothers, said in a Bloomberg Radio interview. “It’s one thing we think will weigh on the euro over the medium term.”

The dollar has rallied 5.4 percent since trading at $1.5144 per euro on Nov. 25, the fastest 21-day appreciation since January. The U.S. currency gained against the yen and 12 other of its 16 most actively traded counterparts since then as traders added to bets the Fed will raise rates next year.

“The dollar can turn around versus the majors and pick up some lost ground,” Thin said. “Once the Fed starts hiking, the yen resumes its role as the major carry trade currency.”

In the carry trade, investors borrow in one currency to invest at higher yields in another. The trade earns a profit based on the difference between the two rates and may lose money should the funding currency strengthen.

Fed funds futures on the Chicago Board of Trade indicate a 91 percent chance the U.S. central bank raises rates by November, up from 84 percent a month ago.