UBS Securities forecasts SET Index at 1,500 points next year

The brokerage also suggests that the government accelerate investment in infrastructure investment as a preparation to becoming a centre for the Asean Economic Community (AEC).

UBS Securities projects growth in gross domestic product at 5.5 per cent next year on high credit expansion.

Raymond Maguire, director of the brokerage, said it estimated a 15-per-cent rise in the SET Index to 1,500 points next year, which would also be a 230-per-cent surge from the 2009 low. The increase could come from significant growth in both personal and business loans.

Thai listed companies’ average earnings are expected to see an 8-per-cent rise with an 18-per-cent increase in average earnings per share in 2013. Their average return on shareholders’ equity (ROE) is forecast at 25 per cent.

These estimates are better than those for global stock markets on average. These are expected to witness sales expanding by 4 per cent with a 7-per-cent rise in earnings per share and 15-per-cent increase in ROE.

With the SET Index at 1,500 points, its price-to-earnings ratio is projected at 13.6 times. Retail investors, who account for 80 per cent of the total in the Stock Exchange of Thailand, are expected to drive the index. Overseas investors are not expected to play a significant role on the SET next year.

"Foreign investors have been net sellers of Thai stocks since May. Recently, large economies, like China and the United States, also announced satisfactory figures and these have driven capital to invest in these countries instead of Thailand," Maguire said.

UBS Research forecasts Thailand’s GDP to expand by 5.5 per cent in 2013 mainly on likely high loan growth. However, there remain external risks, especially economic slowdowns in other countries. If such risks materialise, Thai GDP may expand by only 3.5 per cent next year.

As for the Thai political situation, Maguire does not see it as risk to the economy.

The Thai bourse entered a bull market after the SET Index hit a 16-year record, he said, expressing confidence that lending growth would drive the economy for the next 12-24 months.

Maguire expressed no concern over the public debt or the level of household debts.

If the credit growth level reaches a certain level, the Bank of Thailand may control loan expansion through its policy rate, he said. UBS Research expects the policy rate to decline to 1 per cent.

Maguire said Thailand might need to invest more if it wants to become the centre for the AEC.

Throughout the past 40 years, the Thai government has made small investments in infrastructure. Thus this could be the proper time for additional investment to drive the economy and improve linkages with neighbouring countries.

However, the government may have to be aware of logistics costs. Thailand has logistics costs at 14.7 per cent?? Of what?? while the proper figure should stay at 10 per cent.

The industries that will show attractive returns next year include telecommunications, banking, real estate and transport, Maguire said.

Telecommunications may gain from cost and income restructuring while banks could see support from credit expansion and government expenditures. Real estate is expected to be supported by credit expansion that could stimulate people’s consumption. Industrial estates are expected to draw foreign direct investment.

The energy sector may see risks from the likely slowdown in the global energy market. From the beginning of this year, Thailand’s energy sector yielded 13 per cent lower returns than the stock market.

Kirida Bhaopitrchitr, senior economist for the World Bank office in Thailand, said the global economy next year would be subject to highly uncertainty in Europe and the United States. In the long run, the world economy will recover, but growth will not return to what it was before the global financial crisis.

As Thailand is an open economy and dependent on exports, it has to brace for lower export growth given lower global growth, she warned.