Economy promises modest upside for SET next year, says Aberdeen
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Thailand will see a decent pick-up in growth next year after a difficult 2014, according to Adithep Vanabriksha, chief investment officer at Aberdeen Asset Management Company.
He was speaking at a seminar called “The Road Ahead: Asset Allocation & Market Outlook 2015” in Bangkok, in conjunction with guest of honour Peet Yongvanich, managing director of Morningstar Thailand.
Citing such headwinds as regime change, weak export growth and a domestic economy held back by still-high household debt and a drop in tourist receipts, Adithep pointed to the Bank of Thailand’s growth estimate of 4.8 per cent for next year’s gross domestic product, around its average for the past 10 years.
As for the Stock Exchange of Thailand, it has rebounded this year after falling 7 per cent in 2013. The SET Index is up 21 per cent year-to-date (as at November 21), and is on course to outperform the majority of its regional peers.
Domestic investors, led by institutions, have turned buyers, anticipating a rebound in company earnings once the government’s short-term stimulus package, as well as longer-term infrastructure spending, kicks in. Foreigners, on the other hand, have been net sellers.
Helping the momentum next year will be benign inflation, underpinned by low oil prices and positive trade and current-account balances that should support the baht even as the US dollar strengthens.
Admittedly, Adithep said, some buying has been driven by a search for yield, which has become more indiscriminate. The market is no longer cheap and conditions may prove less liquid if there are any disappointments on earnings.
On the plus side, he commended the solid fundamentals in better quality domestic stocks and good dividend backing for the market broadly – Aberdeen is overweight companies with domestic-based earnings and has always seen strong cash flow and balance sheets as buying prerequisites.
He also stressed that the stock market did not mirror the underlying economy, having more depth in telecoms, property and consumer plays (as well as financials).
These sectors will gain if low borrowing costs help restart spending, as improving business and consumer confidence suggest. Aberdeen is positioned accordingly, he said.
Whatever else the junta has done, he concluded, it has staked out a sensible economic programme with an emphasis on broadening the tax base and making it fairer, the proposed levies on property and inheritance being cases in point.
“Thailand has understandably taken a rap abroad this year but the economy is poised to do better, its underpinnings being very solid,” he said
“It’s true the global recovery remains muted, and there are risks associated with the [US] Federal Reserve’s withdrawal of stimulus [given how distorting this has been to asset prices globally]. There are also risks domestically if spending promises are not met.
“But any volatility could provide buying opportunities in the better-run companies. Compared with other Asian countries’, the Thai stock market continues to offer reasonable value and dividend yield. And sooner or later, foreigners will be back.” Adithep said.
