Investors should buy shares in Thai hospital, media and tourism companies on expectations they will outperform the market in a period of accelerating inflation, according to Kasikorn Securities Co. Ltd.
Holdings in property developers and banks should be cut as slowing economic growth and rising interest rates will hurt their earnings, said Kavee Chukitkasem, an analyst at Kasikorn. Kavee was among two strategists jointly ranked first in the country in 2009 by the Securities Analysts Association, a Bangkok-based equity analysts group.
Thailand joined India and South Korea in extending interest-rate increases in January as emerging markets battle inflation spurred by economic expansion, higher energy costs and more expensive food. The Bank of Thailand needs to raise rates again as consumer-price growth is the “key” risk, Governor Prasarn Trairatvorakul said last week.
“Shares of service providers such as hospital, hotel and media companies will begin to do well as inflation reaches a peak and economic growth slows,” Kavee said in a phone interview today. “Service providers won’t be affected much by accelerating inflation because their costs aren’t linked to commodities and they have bargaining power to boost prices.”
PTT Pcl, Bangkok Dusit Medical Services Pcl, Minor International Pcl, MCOT Pcl, CP All Pcl and Thai Vegetable Oil Pcl are among Kavee’s top picks. He also favors GMM Grammy Pcl, Home Product Center Pcl and Sri Trang Agro-Industry Pcl.
Kasikorn Securities is a unit of Kasikornbank Pcl, the nation’s third-biggest lender.
Thai inflation held at 3 percent in January after accelerating in December, supporting the central bank’s case to raise borrowing costs again. Southeast Asia’s second-biggest economy will post slower growth of between 3 percent and 5 percent in 2011 from an estimate of 8 percent in 2010, the central bank said on Jan. 26.
Thailand’s benchmark SET Index has dropped 6.1 percent this quarter as overseas investors sold a net 27.6 billion baht ($896 million) of the nation’s equities amid accelerating inflation and intensified political tension. The gauge is set to end seven straight quarters of gains that drove it 139 percent higher.
“Banks and property developers are facing downside risks as an economic slowdown and higher inflation rate begins to cut consumer demand for new loans and houses,” said Kavee. Investors should also start accumulating shares of energy companies, farm product suppliers and retailers, he said.
The SET Health Care Service Index, a gauge of listed hospital operators in Thailand, has gained 3.6 percent this year, the second-best performing group in the benchmark index. The SET Media & Publishing Index, which consists of media companies, has dropped 3.5 percent. The SET Banking Index has slid 6.5 percent, and the gauge of property developers has declined 7.1 percent.