Bourse's growth pattern seen returning to normal next year

Investment gurus predict that the Stock Exchange of Thailand next year will return to a normal growth rate after rallying over the past five years. They recommend that investors buy selectively with a strategy of diversification.

The SET Index could end this year with an average of 1,400 points, with trading volume of about Bt30 billion. Year to date, it is still showing a surge of 4-5 per cent despite many hurdles such as adverse economic indicators, political conflicts and capital outflows.

“I think the SET Index is near a correction this year,” well-known value investor Nivate Hemvachiravarakorn said on the Business Talk programme on Krungthep Turakij TV regarding 2014 investment trends.

In fact, the SET Index this year should have been in a negative zone but has been cushioned by new money from Thai investors, he said. “Next year will be a time for correction of the SET Index ... it will be hard [for it] to recover if the economy is adverse.” 

However, Nivate said he did not believe that the protests over the amnesty bill and the World Court’s judgement on the Phrea Vihear case on November 11 would affect the Thai stock market significantly.

For investment in 2014, he suggested the consumer-products sector related to modern food and retail businesses, for example. Export-related stocks such as energy, construction and banking were not recommended.

Somjin Sornpaisarn, chief executive officer of TMB Asset Management Co, foresaw that some money should flow into the Thai bourse via long-term and retirement funds (LTF/RTF) by the end of this year. In the meantime, tapering of the United States’ quantitative easing under the Federal Reserve’s new president Janet Yellen should be put off and a rise in the Fed Fund Rate should be postponed.

Somjin said profitability of listed companies next year would be a key. Earnings growth should be 10-15 per cent on average.

 

Overseas markets 

He suggested that investors should allocate some of their portfolio to overseas stock markets, as the cash that previously flowed from the developed markets to the emerging ones is now heading back. Stock markets in the US and Japan are now attractive, particularly Japan, whose price-to-book ratio is now lower than that of emerging markets.

Sukit Udomsirikul, managing director of Maybank Kim Eng Securities (Thailand), said the political impact on the Thai stock market would be short-term. For the long term, it depends upon whether the Bt2-trillion loan bill can pass parliamentary scrutiny. 

“The [picture for] economic growth next year is not clear, while the downside in capital gains is clear. The political risk can drag down both domestic and foreign investors’ confidence,” Sukit said. 

He suggested a selective buying strategy for next year. For the stock market overall, there will be little upside gain. 

If the political situation is moderate, the SET Index should swing back to 1,500 points. 

The medical and retail sectors will grow at slower pace while construction and telecommunications will grow above the market average. 

“Stock markets in South Asia have grown continually. The SET Index rallied by 35-36 per cent. But what we see is more money flowing to the US and Japan,” he said.