Download SIF II - Pre`tation Nov-02

SIAM INVESTMENT FUND II
Bangkok :
November 2002
Contents







Stockmarket : Recent Performance
Stockmarket : Current Considerations
Stockmarket : Outlook
Economy : Recent Performance
Economy : Challenges
Economy : Outlook
Politics
2
Stockmarket : Recent Performance
SET Index retreating after impressive gains
S&P 500, SET, Asia (ex- Japan) and Euro (entire) with a rebated of 100.
SET Index (Past 12 months)
180
500
4,500,000
4,000,000
400
3,500,000
160
140
SET Index
3,000,000
300
SET Index
120
MSCI Asia
2,500,000
Volume
2,000,000
200
100
EURO
80
1,500,000
S&P 500
1,000,000
100
60
Oct-01
500,000
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
Apr-02
Mar-02
Feb-02
Jan-02
Dec-01

SET Index rose 60% from November
2001 low to June 2002 high

Index has dropped 20% from June
2002 high, but is still up 12% year to
date.
Jan-02
Apr-02
Jul-02
Oct-02
S&P 500 - Standard and P o o r's 500 Index
SET - Sto ck Exchange o f Thailand Index
A sia (ex-Japan) - M SCI A C A sia Free Ex. Japan Index
Euro (entire) - M SCI A ll Co untries Euro pe Index
So urce: B lo o mberg
0
Oct-01
0

Profit taking spurred by declines in
overseas markets, in turn reflecting
global uncertainties (such as Iraq, oil
prices, U.S. “double dip”)
3
Stockmarket : Recent Performance
(cont.)
Favourable performance comparisons
Market Index
Thailand SET (.SETI)
Korea (.KS11)
Malaysia (.KLSE)
Indonesia (.JKSE)
Singapore (.STI)
Philippines (.PSI)
US Dow Jones (.DJI)
Hong Kong (.HSI)
Taiwan (.TW11)
Germany (.GDAXI)


Post - 11 Sep 01 Low
(Date)
a
265
7-Nov-01
469
17-Sep-01
592
7-Nov-01
371
11-Oct-01
1241
21-Sep-01
990
25-Oct-01
8236
21-Sep-01
8859
10-Oct-02
3494
4-Oct-01
2598
9-Oct-02
2002 Peak
(Date)
b
426
13-Jun-02
938
18-Apr-02
808
23-Apr-02
552
16-Apr-02
1805
11-Mar-02
1469
19-Feb-02
10635
19-Mar-02
11975
17-May-02
6462
22-Apr-02
5463
19-Mar-02
Thai market was late in peaking
Strong relative performance, year to date
% Change
% Change
% Change
% Change
a to b
38%
Current
(31-Oct-02)
c
357
b to c
-19%
a to c
26%
YTD
15%
50%
659
-42%
29%
-5%
27%
660
-23%
10%
-6%
33%
369
-49%
0%
-6%
31%
1463
-23%
15%
-11%
33%
1049
-40%
6%
-11%
23%
8427
-26%
2%
-19%
26%
9441
-27%
6%
-21%
46%
4579
-41%
24%
-21%
52%
3114
-75%
17%
-66%
4
Stockmarket : Recent Performance
(cont.)
IBES consensus forecast changes for Thailand
%
6
(#Est up - #Est Dn)/ # Est
SET
4
550
488
2
426
0
364
(2)
(4)
302
(6)
240
J-99
J-99 D-99 M-00 N-00 A-01 O-01 M-02 S-02
Source: SG Research


Index peak coincides with peak in upward revisions of consensus earnings
Strong up-trend in forecasts through 1H 2002
5
Stockmarket : Recent Performance
(cont.)
Equity Buying and Selling Activity

Foreign investors bought steadily in 1H. Have sold steadily since June.

Local institutions held steady until June, then accumulated.

Retail investors sold into strength in 1H.
Oct-02
Sep-02
Aug-02
Jul-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Apr-02
Mar-02
Feb-02
Jan-02
(2,000)
Local institutions
Foreign investors
Retail investors
Jun-02
(1,000)
May-02
0
Apr-02
1,000
Mar-02
2,000
Feb-02
Net foreign flow
(Buy-Sell)
3,000
Btm
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
(5,000)
(10,000)
(15,000)
(20,000)
(25,000)
(30,000)
(35,000)
Jan-02
Btm
Dec-01
4,000
6
Stockmarket : Recent Performance
Variations in sector performances
Sector
Agri Business
Banks
Building Materials
Chemicals
Commerce
Communications
Electronics
Energy
Entertainment
Finance
Food
Printing & Publishing
Property
Transportation
Others
SET Index




% of Market
2
23
11
2
3
9
4
13
4
6
2
0
6
3
11
Index (31/12/01)
58.2
151.9
1890.3
100.7
1804.6
47.1
688.7
3026.9
38.0
908.9
1689.7
391.0
51.0
37.0
5.0
303.9
Latest (31/10/02)
51.8
161.3
3500.0
169.9
1990.0
36.5
702.7
3263.7
45.9
1155.2
2012.0
453.3
88.2
60.9
5.3
357.2
% Change
-11.9
5.2
84.2
67.7
9.3
-23.5
1.0
6.8
20.0
26.1
18.1
15.0
72.0
63.4
3.8
16.6
Building Materials lead the larger sectors with 84% gain ytd
Property, Chemicals and Transportation excel
Telecoms continue to lag on competition/regulatory (concession) concerns,
while agribusiness is hit by EC ban on Thai shrimps. “Techs” also lag.
Banks disappoint while defensive sectors (energy/commerce) also sluggish
7
Stockmarket : Current Considerations
Favourable valuation and liquidity backdrop, but lacking a catalyst for a sustained
rerating

Non-bank earnings have typically exceeded expectations (in 1H), leading to an upward
shift in consensus forecasts

Earnings surprises have been in margin improvement rather than top line growth (see
table below)

Deposit rates were cut in October (by 25 bps) bringing the 3m fixed deposit rate down
to 1.75%. Interest rates expected to remain low

Large Privatisations have stalled (a disappointment after the success of PTT)

Oil prices are high (with war premium)

External economic environment remains weak, undermining Thai export outlook

Flooding to impact Q4 economic performance

Scope for economic growth to moderate in 2003, raising specter of downward revisions
in earnings forecasts
% Change YoY
Top 50 Non-Financials *
1H Revenues
1H EBITDA
1H NP
+13%
+12%
+42%
* Ex-PTT
* Represents 50% of Total Market Capitalisation
8
Stockmarket : Current Considerations
(cont.)
Market Valuation
Monthly index
EV/EBITDA 8.0x
EPS Growth
PE
Yield
P/BV
650
EV/EBITDA 7.0x
2003
2003
2003
1Q2002
Market *
31%
9.3x
2.20%
2.2x
Ex-Banks & Finance
24%
8.3x
3.30%
2.4x
EV/EBITDA 6.0x
550
EV/EBITDA 5.0x
EV/EBITDA 4.0x
450
* Top 50 stock s representing 77% of SET mark et capitalisation
350
250
150
50
Dec-97
Jun-99
Dec-00

PEs and Yields are attractive

Favourable regional valuation
comparison
Jun-02
Regional valuations
2002
Including Banks
PE
PBV
Taiwan *
25.16
1.80
Singapore
16.91
1.10
Malaysis
14.72
1.60
Hong Kong
13.48
1.33
Philippines
18.23
0.93
Thailand
10.12
1.57
Indonesia *
5.75
2.27
India
10.79
1.73
Korea
7.50
1.60
China
8.92
1.13
PE
20.68
17.00
14.69
12.64
14.65
8.78
5.75
10.88
7.50
8.88
Excluding Banks
PBV
EV/EBITDA
1.92
3.11
1.00
8.74
1.57
7.53
1.10
8.38
0.88
5.68
1.30
5.74
2.27
3.34
1.79
6.69
1.62
4.28
1.14
4.22
Banks only
PBV
1.02
1.33
1.67
2.00
1.15
1.51
n/a
0.73
1.33
0.63
* no bank coverage. Source : SG Research
9
Stockmarket : Outlook
Limited downside with scope to move higher

While we see limited sustained share price momentum in either direction,
near term, we see scope for the SET Index to trend higher in 2003.

A still favourable economic growth outlook (absolute and relative), a benign
interest rate environment and modest stock valuations outweigh, in our view,
concerns over growth disappointments in the major economies and
potentially sluggish overseas stockmarkets.

The war threat (Iraq) has subsided, but will likely re-emerge in early 2003.
This could well result in a degree of volatility. Market downside, however,
looks limited barring an extreme scenario.
10
Economy : Recent Performance
Economic recovery continues
Manufacturing Production Index (% YoY)
Re al GDP Growth
Growth Rate
10
20%
5
15%
0
10%
-5
5%
-10
0%
-15

Steady pick up in economic activity from 2H 01

2Q 02 GDP growth reaches 5.1% YoY

Growth led by domestic demand
Aug-02
Jun-02
Apr-02
Feb-02
Dec-01
Oct-01
Aug-01
Jun-01
Apr-01
Feb-01
Q2-02
Q3-01
Q4-00
Q1-00
Q2-99
Q3-98
Q4-97
Q1-97
Q2-96
Dec-00
-5%
-20
11
Economy : Recent Performance
(cont.)
Positive trends in domestic spending
Area approved for construction - Nationwide
20
15
10
5
70,000
Unit (LHS)
90
20%
0%
80
-20%
-40%
70
-60%
-80%
60
50
Sep-00
Total Car S ales
Units
60%
40%
5M2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
0
Jan-01
May-01
Sep-01
Jan-02
YoY (RHS)
50,000
40%
40,000
50%
30,000
0%
20%
20,000
0%
-50%
10,000
Sep-02
Jan-02
May-01
Jan-00
Sep-00
May-99
Sep-98
-100%
Jan-98
-
Sep-96

Cement
demand up
on increased
construction
activity
Monthly domestic cement sales growth
YoY
60%
May-97
Consumer
confidence
index at 12
month highs
May-02 Sep-02
100%
Jan-96

150%
60,000
May-95
Boosted by
easier access
to (low-cost)
credit
Growth
25
Sep-94

38% growth
vehicle sales
(Jan-Sept.)
Area
30
Jan-94

Housing sales
boosted by
lower mortgage
costs and
easier access
to loans
Mil. sq.m.

Consum er Confidence Index
100
Jan-00
-20%
Jun-00
Nov-00
Apr-01
Sep-01
Feb-02
Jul-02
-40%
12
Economy : Recent Performance
(cont.)
Improvement in Trade
Export and Import Growth
Growth Rate
40%
Exports
Imports
30%
20%
10%
0%
-10%

Trade activity picks up, but from a low base

Exports hit 22 month high in September
2Q02
1Q02
4Q01
3Q01
2Q01
1Q01
4Q00
3Q00
2Q00
1Q00
4Q99
3Q99
2Q99
1Q99
-20%
13
Economy : Recent Performance
(cont.)
Interest rates remain at historically low levels
8.0%
6.0%
Minimum Lending Rate (LH)
Consumer Price Index (% y-o-y) (RH)
Core Inflation Grow th (RH)
4.0%
2.0%
Aug-02
Jun-02
Apr-02
Feb-02
Dec-01
Oct-01
Aug-01
Jun-01
Apr-01
Feb-01
Dec-00
0.0%

Interest rates steady for most of the year (after January reduction)

BBL initiated a 25bps cut in October, though Bank of Thailand held
repo rate steady
14
Economy : Recent Performance
(cont.)
Bank NPLs steady while loan growth picks up
%
140
NPLs steady (as of Total
Assets)

120
TAMC claims significant
progress in debt restructuring

100
Bank Lending shows sign of
picking up in Q3

Bank Loan to deposit
80
60
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02
%
Non Performing Loan (NPL)
40%
Bank Deposit growth and Bank Lending growth
10
35%
30%
5
25%
0
Deposit
20%
-5
15%
-10
10%
5%
Lending
-15
2Q02
1Q02
4Q01
3Q01
2Q01
1Q01
4Q00
3Q00
2Q00
1Q00
0%
-20
1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02
15
Economy : Recent Performance
(cont.)
Monthly economic data from Bank of Thailand
Thai Economy : Recent Developments
2002
% YoY
Jan.
Feb.
Mar.
Apr.
May.
Jun.
Jul.
Aug.
Sep. Comment on September data:
1.3
2.0
8.5
9.0
8.4
12.8
9.6
11.4
9.8 
Dips on mainternance shutdowns
Consumer Confidence Index *
72.4
70.7
73.2
74.2
78.1
82.1
84.4
86.7
88.2 
Improving consumer confidence
Comm'l vehicle Sales
45.2
42
42.4
27.1
12.4
31
62
66.9
81.7
Vehicle Sales
45.2
36.2
29.6
30.8
15.9
28.8
47.8
51.2
62.5
Cement Sales (tonnes)
25.8
20.5
50.5
12.9
9
21
31.3
31.3
22 
Flooding slows construction activity
Exports
-6.4
-8.1
-4.6
1.1
4.3
4.4
7.7
8.1
18.2 
Imports
-8.0
13.7
-9.3
3.8
-2.7
5.5
11.1
19.4
8.3
Jump in exports, though weaker
imports suggest a possible "one off"
Trade Balance (US$)
-178
478
394
-265
517
365
-185
238
827
CA Balance (US$)
322
1029
446
-119
630
509
247
867
985
BOP (US$)
917
97
-127
295
563
1035
717
591
Official Reserve (US$)
33.8
34.0
33.6
34.4
35.3
36.8
37.8
38.5
Bank Lending
-5.9
-4.5
-3.8
-2.7
-1.7
-0.8
-1.3
-1.2
1.6 
Slight pick-up in loan growth. First positive growth for 4 years
Bank Deposits
4.6
5.1
5.3
5.6
5.6
5.5
6.1
7.6
2.4 
Switch to bonds
10.5
10.3
10.3
10.3
10.8
10.2
10.3
10.2
10.1
Manufacturing Production
NPLs
MLR (BBL)
 Supported by low financing costs
-1036 
37.7
7.0
7.0-7.25
7.0-7.25
7.0-7.25
7.0-7.25
7.0-7.25
7.0-7.25
7.0-7.25
7.0-7.25
2.75-3.0
2.5-3.0
2.5-3.0
2.5-3.0
2.5-3.0
2.5-3.0
2.5-3.0
2.5-3.0
2.5-3.0
CPI
0.8
0.3
0.6
0.4
0.1
0.2
0.1
0.3
0.4 
Core CPI
1.0
0.9
1.0
0.5
0.4
0.2
0.2
0.3
0.3
Baht/US$
44.0
43.8
43.4
43.4
42.8
42.2
41.2
42.2
42.8
Fixed Dep Rate (3m)(BBL)
Falls despite strong trade surplus due
to foreign debt repayments
Slight pick-up in CPI as agri prices harden
* not %YoY
16
Economy: Challenges
Risk of moderating growth in 2003

3Q and 4Q economic performance to be hit by widespread flooding

Export recovery may prove sluggish as major international
economies struggle to grow

Government spending will have to be reined in as debt levels
rise(though fiscal revenues have exceeded targets)

Oil prices are at high levels (with war premium)

Boom in consumer credit raises spectre of pick-up in problem loans

Continued low inflation sparks debate on deflationary threat
17
Economy : Outlook
Thailand Economic Forecasts
1998A
1999A
2000
2001
2002F
2003 F
GDP Growth (% YoY)
-10.8
4.2
4.4
1.8
4.1
3.5
Private consumption Growth %
-11.5
4.0
4.3
3.4
4.0
3.5
Private Investment Growth %
-53.2
-5.0
14.6
0.8
3.0
4.0
8.1
0.3
1.6
1.6
0.8
1.4
Export Growth (% YoY)
-6.8
7.4
19.5
-6.9
1.7
5.0
Import Growth (% YoY)
-33.0
17.7
24.6
-2.8
2.0
7.0
Trade Balance (US$bn)
12.1
8.6
7.7
6.1
5.4
5.0
Current Account Balance (US$ bn)
14.3
12.5
9.2
7.6
4.4
4.0
C/A as % of GDP
12.7
10.2
7.5
2.5
2.5
1.4
Exchange Rate (B/US$) Year End
36.3
38.5
42.9
44.0
44.5
46.0
9.5
2.1
3.7
5.5
4.0
4.0
11.5
8.2
7.5
7.3
7.0
7.5
6.0
3.8
3.0
2.25
1.75
2.0
-2.7
-2.6
-2.2
-2.1
-2.9
-3.2
CPI Inflation (% YoY)
Money Supply Growth (M2 % YoY)
MLR (% pa) : Year End
3M Fixed Deposit rate (% pa) : Year End
Fiscal Balance as % of GDP




Consensus growth of 4.0% - 4.5% in 2002
GDP growth to slow in 2003
Exports and domestic consumption to remain important drivers
Subdued inflation and interest rates
18
Politics
PM aims to cement control in political arena

The passage of two bureaucratic reform bills in August paved the way for a
cabinet reshuffle.

Six new ministries created

PM’s influence extends into military promotions

Democrat Party fails to present itself as a credible opposition.

Next election expected in late 2004
19