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SCMP Reporter

THE chorus of warnings about the problems facing the Thai stock market have been joined by Fidelity Investments.

   The award-winning team sees a whole range of issues which are likely to keep the Bangkok bourse on the sick list.

   These include a relatively weak economy, uncertainty over the bad loan situation at banks and a possible devaluation of the currency.

   There's unlikely to be any improvement in the near term, they say.

   Better bets in the region include Hong Kong, the star performer of 1996, which is expected to benefit this year from stronger growth in China and a relatively benign outlook for interest rates.

   So far, however, it has been the European and US markets which have set the pace - moving ahead more strongly than Asia - but Fidelity still finds value in some regional markets.

   Indonesia's economic outlook is improving and interest rates are likely to remain at favourable levels, they say.

   Malaysia could benefit from a series of upward provisions in profit forecasts, with many companies now offering attractive opportunities. After last year's stellar performance by the United States - powered by a net inflow of a record US$223.3 billion of funds - there is still room for more, Fidelity believes. 'We believe the outlook for the economy remains relatively favourable. Alan Greenspan, the chairman of the Federal Reserve, recently said inflationary pressures may be overstated, which boosted the bond and equity market. Nevertheless, the consensus believes the next move in interest rates is more likely to be up than down,' says Fidelity.

   Japan has been a friendless market and is likely to remain so. Large blue-chip export companies have outperformed the general market as they are seen as primary beneficiaries of a weaker yen. Best investments are companies with strong positions in their industries and which sell on attractive valuations, relative to profit growth expectations.

   Across the Atlantic, the question is whether the European equity markets can maintain the early momentum, which has seen many reach all-time highs.

  Fidelity says they have benefited from a decline in bond yields, US stock market strength and, in some cases, companies reporting better-than-expected profit results.

  Investors have primarily concentrated on growth stocks and those sectors benefiting from lower interest rates. A period of mild consolidation this year would not be surprising. However, Fidelity is still positive in the medium term.



Thai woes set to continue