Some corporate bonds a good bet, analyst says

n Thai stocks not attractive

The Stock Exchange of Thailand is not attractive now after the local bourse outperformed other markets few years ago, Mark Matthews told The Nation in Bangkok.

Selected corporate bonds are attractive, such as the US dollar-denominated bonds issued by PTTEP, which carried a high investment grade rating of "BBB+" but are selling at a very low price.

The government is making some misallocations of the budget, for example, it spends a large amount on the rice subsidy while needing to invest more in education and healthcare.

"There may be some misallocation of capital but not enough to cause a systematic problem," he said.

n The Philippines shines

Among Asean countries, the Philippines has the most promising future, taking into account the large young population compared with Thailand, which is ageing rapidly. Filipinos are also fluent in English and 12 million of them work overseas. They become high earning professionals, such as nurses and doctors.

Indonesia has been experiencing current account deterioration due to its oil subsidies.

Investment in the Korean stock market is suggested for the next 12 months as it is expected to be driven by petrochemical, ship building, steel and construction. But these sectors are generally not good for long-term investment as they are volatile in nature and do not pay high dividends.

Economic growth in China has stabilised due to fairly good domestic demand. The government will not let growth fall below 7 per cent. There are some concerns over false export data, credit booms and shadow banking but the Chinese authorities are starting to address these issues. Investment in Chinese stocks is not recommended due to non-transparent data, for example, false export data. He does not like state-owned firms.

n European stocks recommended

European stocks are recommended due to relatively cheap prices. The eurozone is coming out of recession and German leaders’ attitude of austerity has changed after they realised that deep spending cuts in troubled economies also adversely affect the Germany economy.

n Gold not good for investment

The crises in Europe and the United States are over, so there is no need to own gold. Julius Baer forecasts the gold price dropping further to US$1,200 per ounce next year.

n Don’t worry about US debt ceiling

There was no need to worry about the possibility of a fiscal impasse in the next few months after the US Congress only fixed the fiscal issue temporally by funding the budget until January 15 and raising the debt limit until February 7.

"The debt ceiling will be raised. It has already been raised 42 times since 1980 by both Democrat and Republican governments" he said.

US stocks could not be recommended due to their relatively high prices.

n QE tapering begins April or May

The Federal Reserve is expected to begin tapering its purchases of long-term bonds worth $85 billion a month in April or May.

"Tapering will not be on the cards until Janet Yellen becomes chairperson of the Fed in late February," he said.

To start the tapering, three conditions have to be met – improvement of the labour market, inflation moving toward 2 per cent and faster economic growth.

The government shutdown and fear of the debt ceiling are causing the economy to expand this quarter and the Fed will use it as an excuse for delaying tapering.

n Less impact of tapering on capital outflows.

The impact of tapering on capital outflows from emerging markets including Thailand will not be much, as the market has already priced in the tapering factor.