Market Watch

  Therdsak Thaveeteeratham
Executive Vice President / Research
Asia Plus Securities

THREE TO FOUR US interest-rate rises by 100 basis points are expected in eight Federal Open Market Committee meetings planned in 2017. 
The fed fund rate currently stands at 0.75 per cent. 
Thailand’s policy rate is expected to remain unchanged at 1.50 per cent in the first half of 2017. That situation would put pressure on the baht to depreciate against the US dollar, which would affect movement of foreign capital.
Fixed-income instruments will likely be risky in capital outflows, given that the differential between Thai and US bond yields is close to zero, reflecting no significant difference. Previously, Thai bond yields were more than 3 percentage points higher than US bond yields. Moreover, it’s possible US bond yields will rise further as the US policy rate tends to increase. 
The Stock Exchange of Thailand is expected to see no other significant capital outflows as the big round of capital outflows has passed and the current foreign holding of Thai shares is at its lowest level in more than 10 years. Also, the SET’s expected return is around 5 per cent in 2017. 
We set 1,600 points as the expected return, which will likely be higher than the baht depreciation that may arise. That means that the real return on the Thai bourse, in the aspect of foreign capital, remains positive. Given such compositions, we believe no significant capital outflows will arise. Indeed, some capital may flow in but that would not drive the SET Index.
On a performance basis, Thai listed companies are expected to have a combined net profit of Bt952 billion, or Bt100 per share on average, in 2017. The key assumptions include estimated growth in gross domestic product at 3.5 per cent, a Dubai crude-oil price at US$55 per barrel, an average credit expansion of Thai commercial banks of 5.9 per cent and an expected average net interest margin for commercial banks of 3.1 per cent. 
The market’s price-to-earnings ratio is targeted at 16 times, which is the equivalent to the targeted SET Index of 1,600 points.
Stock picks (dividend yield at higher than 6 per cent per annum): LH (Land and Houses), ASK (Asia Sermkij Leasing), SNC (SNC Former), SENA (Senadevelopment) and MCS (M.C.S. Steel).

Prakit Sirivattanaket
Vice President
Kasikorn Securities
KS Portfolio Strategy is an example for investment. In 2016, KS Portfolio provided a return of 30.5 per cent during from May onwards, higher than the SET Index’ return of 8.01 per cent.
KS Portfolio weighs 20 per cent for each stock (no more than five stocks in the port), focusing on ATO (at-the-opening) for easier investment and return calculations. 
The current port earlier held three stocks: BEAUTY (Beauty Community), BLA (Bangkok Life Assurance) and PTTEP (PTT Exploration and Production), with a combined investment at 60 per cent, and had cash at 40 per cent. Recently, it sold BLA to take profit and purchased TKN (Taokaenoi Food & Marketing) at ATO for a 20-per-cent weight.