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.