Invest in stocks, not in bonds, |in Q4 for best returns: experts

Somchai Amornthum, executive vice president of the research department at Krung Thai Asset Management (KTAM), said the low level of the policy rate, which is expected to return to a slow upward trend, had made investment in bonds less attractive than investment in stocks.
“The current scenario for investment in bonds is not interesting and investment in stocks is more attractive from the potential of the economic recovery and the current low level of the interest rate,” he said.
Prapas Tonpibulsak, chief investment officer of Krungsri Asset Management, said the recovering economy should provide a better return on investment from stocks than from bonds next quarter as the performance of companies listed on the Stock Exchange of Thailand will move in parallel with the economic recovery.
“The stock market is currently reflecting the economic recovery, which has led to the improvement of listed companies’ performance, along with the expected gradual rise of the interest rate, while the current relatively low inflation and interest levels are less desirable for the bond market,” he said.
KTAM expects average earnings of 11 per cent for Thai listed companies with a price-to-earnings (P/E) ratio of 16 times by the end of the year. Krungsri Asset expects average earnings of 5 per cent with a P/E ratio of 17 times, and Prapas believes that the SET Index will end the year at around 1,600 points.
KTAM says the SET Index should be able to end the year at 1,580 point and reach 1,680 by the end of 2015, which means that it expects the capital market to be on an upward trend. Somchai has warned that there might be a chance for a market correction but believes it would not be aggressive thanks to the gradual rise of the stock index.
Prapas expects a market correction in the fourth quarter, since the index has increased substantially from 1,300 in May to the current 1,500 range.
As for bonds, with the Bank of Thailand’s policy rate at 2 per cent, KTAM sees a 3.5-per-cent yield for 10-year bonds, and Somchai believes that the central bank’s Monetary Policy Committee (MPC) will increase the rate by 0.5 percentage point in the second quarter of 2015.
Prapas said: “Bond yield in the last quarter will move sideways, and the MPC should hint at its next meeting that it will not lower the interest rate any further this year, since the economy is recovering.” Krungsri Asset foresees a bond yield of 3 per cent by the end of the year.
Thailand’s policy rate of 2 per cent is the third-lowest in Asean, and the BOT believes that the country’s gross domestic product will be able to grow by almost 5 per cent from July this year through to June next year, according to its last projection.
As for investment in gold, Somchai said the global gold price would move sideways. He believes that the gold price, which was US$1,289 per ounce on Friday, will increase to $1,350 by the end of the year. That is line with the prediction of the American Precious Metals Advisers, who predict a price of around $1,380 by year-end.
In the first half of 2014, companies listed on the SET had a combined net profit of Bt203.71 billion, an increase of 20.62 per cent from 2013. The index ended July at 1,502.39 points. Market capitalisation was Bt13.50 trillion along with a P/E of 14.95 times.
The yield for 10-year government bonds is currently around 3.58 per cent.