Merrill Lynch downgrades RI rating, raises Thailand's

Merrill Lynch downgrades RI rating, raises Thailand's

Bloomberg, Singapore

Merrill Lynch & Co. advised investors to buy more Thailand stocks, especially lenders such as Krung Thai Bank Pcl and construction companies including Siam Cement Pcl, because of an expected increase in domestic demand.

Thailand's rating was raised to "overweight" from "market weight", Spencer White, head of Asia-Pacific equity strategy, wrote in a report published yesterday. The brokerage had lowered Thailand's rating from "overweight" in February.

The strategist maintained his "overweight" recommendations on South Korea, Hong Kong and Malaysia. White cut Indonesia to "underweight" from "overweight," citing a slowdown in economic growth and corporate profits.

For the year, Thailand's SET index is the worst performing index out of 60 measures that Bloomberg tracks globally, shedding 19 percent in dollar terms.

He said he prefers shares of Krung Thai Bank, Thailand's second-largest lender, and Bangkok Bank Pcl, the biggest. He also recommends Siam Cement, the largest cement maker; Land & Houses Plc, the largest homebuilder; and Shin Corp., which controls the nation's biggest mobile-phone operator.

The Thai central bank expects the economy to grow as much as 7 percent in 2004. Southeast Asia's second-largest economy expanded a seasonally adjusted 6.7 percent in 2003, the fastest pace in eight years.

To make room in his regional portfolio model, White lowered his rating on Indonesia, saying slowing economic and profit growth will weigh on the country's stock market. He said investors should also avoid Indonesian stocks before the final round of the presidential election, to be held this month.

Indonesia held parliamentary polls in April and the first round of a presidential election in July. President Megawati Soekarnoputri will face former Security Minister Susilo Bambang Yudhoyono of the country's first direct presidential election.

Indonesia's economy grew 4.3 percent in the second quarter from a year ago, after growing 5 percent in the first quarter. Record oil prices may slow expansion further this quarter, the government has said.

"The economy already appears to have hit a softer-than- expected patch in the second quarter of 2004 and we sense that this may not be regained for some time to come," said White.

Indonesia's Jakarta Composite Index gained 13 percent so far this year on expectations an improvement in domestic demand will boost corporate profits.