Yes I do think we will soon see the Thai stock market roll over and correct some. Hence, I advocate increased caution and selective profit taking as individual stocks continue to soar in price. Despite this short-term correction, I think the market has much further to go, but I question if this will happen as soon as the self-acclaimed experts would like us to believe.
September and October can be a tricky time for the local stock exchange; the last 4 years the SET has had a hard time every 3rd quarter. Can this year be different? Why should it?
Potential rain floods, a US/EU market correction, soaring global oil prices, a new global accident of some sort, etc. All of these dangers brewing are enough to make the nervous money to take a break. Bull markets are notorious for short but sharp corrections. With the 2nd quarter earnings released and first half dividends now XD, the market may be ripe for some profit taking during September.
There was a time in 1989 similar to now. The Thai economy was rolling along and it was evident things were going very well in the Kingdom. Clearly a boom in the economy was about to occur. Morgan Stanley at the time wrote that Thai stocks would shoot ï¿½straight upï¿½. Yet Thai stocks just sat still for several months until they belatedly started to climb late in 1989. Nobody could understand this; the economic news went from good to even better while at the same time stock prices languished for a while. While I do not see the same scenario, there is now a clear risk of a sharp but short price correction which may cause new investors some pain. Is it worth the risk to wait? Only investors can decide for themselves, long-term value investors should probably abstain from making short term calls. I am decidedly taking a more cautious approach in the next couple of months.
Long term investors can hold on to their shares, but superior performance will come mostly to those who take advantage of market price gyrations. Remember, transactions are low and taxes on Thai capital gains tax are non-existent to individuals. Most of all, it is a market of stocks, not a single stock market. So there are always some shares which have corrected already and some which will hold their value when the correction comes. But a general price correction will come sooner rather then later, in my opinion.
Paul A. Renaud.
Noon, August 25, 2003
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