Fund inflows behind SET’s rally

The SET Index ended the day at 1,510.03 points, a level unseen since June 2015 when the index closed at 1,504.55 points. It gained 18.03 points or 1.2 per cent from the previous close on Friday, with turnover of Bt64.10 billion.

The index last week briefly touched 1,500 points. Thanks to capital inflows, the Thai baht yesterday gained against US dollar, standing at Bt35.02 at the close or a gain of 0.28 per cent from the beginning of this month.

In a research note, DBS Vickers Securities (Thailand) attributed the rally to foreign-fund inflows, particularly to energy stocks. Energy stocks contribute about 30 per cent of the SET Index’ weight. 

Crude-oil prices have fluctuated between US$44 and $52 per barrel in the past month, after falling below $30 in February on the back of the world supply glut and weak demand.

Should the SET Index pass the 1,500-points psychological level, the next resistance line would be 1,510-1,520 points, DBS said.

From the beginning of this year through July 15, foreign net-buys of Thai shares totalled Bt58.52 billion. Cumulative net-buys in the first 15 days of the month reached Bt22 billion. 

Tisco Securities’ data show that the SET is among the more attractive markets in Asia. As of Friday, the year-to-date inflows of Bt58.52 billion (about $1.66 billion) put Thailand behind only Taiwan (with net inflows of $9.29 billion), South Korea ($5.7 billion) and India ($3.7 billion). Trailing behind were Indonesia ($1.56 billion) and the Philippines ($934 million).

Foreigners continued to buy Thai shares yesterday, with net-buys of Bt5.05 billion, while individual investors were the net sellers of Bt4.94 billion. 

Despite the rally, brokerage houses in Thailand reckoned investors should beware of volatility. As of Friday, the SET Index had gained 15.84 per cent so far this year.

“The market is in the ‘overbought’ zone,” KT Zmico Securities said.

In the World Economic Outlook Update released on Tuesday, the International Monetary Fund cautioned that emerging-market economies more broadly needed to be alert to financial stability risks, to be introduced by UK citizens’ vote last month to pull out of the European Union. 

The IMF urged policymakers to strengthen defences against protracted periods of global financial turbulence and tighter external financial conditions. Priorities include reining in excess credit growth where needed, supporting healthy bank balance sheets, containing maturity and currency mismatches, and maintaining orderly market conditions.

And policymakers need to stand ready to act more aggressively and cooperatively should the impact of financial-market turbulence and higher uncertainty threaten to weaken the global outlook materially, the update said.