SET surges on capital inflow

Aside from the Bt299-billion inflow to the Thai bond market in the first quarter, a huge amount of capital also went to the equity market.
According to the Stock Exchange of Thailand’s website, foreign net-buys yesterday reached Bt1.181 billion, just under the Bt1.182 billion achieved during the rest of April. Year to date, net-buys amounted to Bt83.95 billion.
The SET Index ended the day at 1,228.49 points, the highest level in 16 years and four months.
While the policy rate may remain unchanged, the Finance Ministry yesterday revealed plans to run budget deficits for another three years in order to finance investment. It aims to run a balanced budget in the 2016 fiscal year.
Chai Chirasevenupraphund, manager of Capital Nomura Securities’ Market Strategy Department, attributed the market advancement to investors’ focus on “domestic plays” as they are expected to report robust quarterly earnings. due to strong domestic demand
Investors also anticipated that the Monetary Policy Committee will maintain the policy rate at meeting tomorrow, he said.
DBS Vickers Securities (Thailand) said in its research that while the euro-zone recession posed concerns and could pull the index down to 1,150 points, the Thai market still looked attractive due to the strong domestic economic recovery.
The Fiscal Policy Office recently announced the likelihood that the economy would expand 6-7 per cent this year, due to an increase in domestic consumption, private investment and public spending.
Thanks to the strong recovery, the Thai Bond Market Association has attracted huge inflows.
Association chairman Bandid Nijathaworn said yesterday that foreign net investment in the first quarter had hit Bt299 billion, including Bt49.5 billion in short-term bonds. This boosted outstanding foreign bond holding to Bt550 billion, up 30 per cent from the end of last year. The value accounted for about 7 per cent of all outstanding bonds.
“Foreign investment has continued. Due to global risk factors, foreign and local investors invest more in short-term bonds. The growth momentum should continue in the second half. We expect new bond issuance worth Bt350 million-Bt400 billion this year,” he said.
Yields of short-term bonds have weakened in line with repurchase rates, but those of long-term bonds have risen ahead of massive bond issuance by the government to fund post-flood investment. It is expected that during April to September, the government will issue a total of Bt360 billion in bonds, said Bandid.
On the interest rate, the former deputy governor of the Bank of Thailand advised the central bank to be more biased towards inflation than economic growth, as the latter could be stimulated in many ways.
With the central bank about to decide on the policy rate, most economists believe it will maintain the key rate at 3 per cent in order to accommodate further economic recovery.
Meanwhile, a meeting took place at the Finance Ministry yesterday between Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong and high-ranking officials.
It was announced after the meeting that in 2016, government expenditure and revenue would be balanced at Bt2.74 trillion. In the past 15 years, balanced budgets were achieved only twice, in 2005 and 2006.
While the Yingluck Shinawatra administration is running a deficit of Bt400 billion in the current fiscal year, or 3.5 per cent of gross domestic product, the deficit will be Bt300 billion in the next fiscal year, when expenditure will be Bt2.4 trillion against revenue of Bt2.1 trillion.
In 2014, expenditure is set at Bt2.53 trillion, against revenue of Bt2.29 trillion. The following fiscal year, expenditure is set at Bt2.63 trillion, against revenue of Bt2.54 trillion.
The Finance Ministry also said it now expected the size of the economy to reach Bt15 trillion in 2016.