Foreign investor confidence for next 3 months at 15-month low

Nevertheless, retail and proprietary investor confidence has increased, which has contributed to an overall increase of 4.02 per cent in the Investor Confidence Index from 57.27 in July to 59.57 in August.
The FETCO NIDA Investor Sentiment Index for September shows that the sentiment of foreign institutional investors dropped by 36 per cent from a bearish 62.50 points to an extremely bearish 40 points.
The index measures the confidence of all four types of investors and ranges from 0-200 points. Lower than 80 is bearish; 40 or lower is extremely bearish; 80-120 is neutral; more than 120 is bullish; and higher than 160 is extremely bullish.
“Foreign-investor confidence based on the index in the short term is low because they no longer want to hear hopes – they want to see numbers,” said Prinn Panitchpakdi, country head at CLSA Securities (Thailand).
“The Thai economy is regressing and the government’s implementation of policies is slower than expected, while there is uncertainty as to whether domestic consumption will turn around after the stimulus measures were launched.”
Nevertheless, he said the relative performance of Thailand was still brighter than the Malaysian and Indonesian economies, with those countries also hit by the slowdown of China import demand and the drop in global oil prices.
He said Malaysia’s and Indonesia’s situations were worse than the Kingdom’s and their currencies had plunged much further than the baht.
The valuations of Philippine shares were higher than Thailand’s price-to-earnings ratio, he added.
Prinn said foreign-investor confidence would increase after uncertainty surrounding the expected US Federal Reserve interest-rate increase disappeared.
He said the expectation that the return on equity (ROE) of Thai listed companies’ shares in three to five years from the expected increase in government spending on mega-projects was also a positive sign.
“Foreign investors are working in terms of bottom-up stock picking and factor-based investment, so they care more about which shares are expected to have a better ROE and dividend,” he said.
“And the most interesting right now are in the construction sector and sectors that are related to domestic consumption, which are apparently being stimulated, and the banking sector, which is one of the first sectors that will be brought up if people start to have interest in Thai stocks again.”
He said government measures to stimulate the grass-roots economy and support small and medium-sized enterprises, the recalculation of energy prices and the anti-corruption measures looked good to foreign investors.
But they were still waiting to see an increase in private investment while the slowdown in China remained a source of short-term concern when looking at Thai shares.
“If the Fed does not increase rates next week, then the flow will come back, and once the yuan is stable and the Chinese government is more daring in terms of stimulus measures, foreign investors will start to look at Thai shares again,” Prinn said.
Sukit Udomsirikul, managing director and head of research at Maybank Kim Eng Securities (Thailand), said the declining trend of the SET Index since May and the previous panic sale had brought the valuation of Thai shares to an attractive level for retail investors, and that had contributed to their increased confidence.
Sukit said the reason investors currently labelled the steel industry as the worst place to invest was the slowdown in China’s import demand and the drop in oil prices.
The information and communications technology sector is the most attractive for shares, since its performance has continued to increase at a stable pace, and the auction of fourth-generation telecom licences expected to begin in November is another attractive development for the sector.
Sukit said the current valuation of Thai shares was 13-14 times. He said that was based on future earnings such as shares in the banking and real-estate sectors, where the price-to-earnings ratio was more interesting and the valuations in other groups were at the middle level.
The valuation of the construction sector is not low because of its growth potential from government policies and expected investment.
“The government measures mean that the economy is expected to be better next year and that along with its current valuation, shares in the banking and real-estate sectors are more attractive at the moment,” he said.