Marketwatch

  Therdsak Thaveeteeratham
Executive Vice President / Research
Asia Plus Securities
From late 2008 onwards, |central banks in major economies started adopting monetary easing packages to tackle their economic and financial problems, starting from a financial crisis in the US, a debt crisis in Europe and economic slowdowns in many countries. Prolonged monetary easing usually heightens money supply in a system rapidly. 
In the case of Thailand, M2 money supply surged from about Bt10 trillion in late 2008 to more than Bt18 trillion now. Such a big increase pushed up prices of several assets; however, it reduced yields on assets, particularly financial assets. It’s believed that monetary easing has been dwindling. 
In the US – the first to adopt the extreme monetary easing policy through quantitative easing (QE) and its benchmark rate cuts to a record low at 0.25 per cent – the Fed started to reduce QE in January 2014 and ended the programme in January 2015. After that, the US central bank turned to hiking the Fed Fund rate four times to 1.25 per cent from December 2015 to June 2017. 
In Europe, the ECB signalled reducing the monetary easing package. Thailand is believed to have gone through the interest rate’s downward trend. However, a policy-rate rise is not expected now. This week, the Monetary Policy Committee is expected to put the policy rate on hold at 1.5 per cent and leave it unchanged until the end of 2017, and raise it thereafter. 
Under these circumstances, there is less chance to see new investment flowing into the Thai stock market. Meanwhile, investment may move from the Thai bond market to the Thai exchange after a wider yield gap between these two markets (market earning yield gap at 5 per cent).
This week, the main point is still about progress of the government’s mega-projects, extending from double-track railway projects, the high-speed project, and the monitor way project. This will likely boost market sentiment, particularly for construction stocks, which directly receive benefits from the coming investment. By the end of 2017, bidding results are expected for several of the above projects. 

STOCK PICKS:
Eleven construction firms’ (in ASAP coverage) backlogs are expected to increase from Bt426 billion now to over Bt500 billion, a new high. Stock picks: CK (fair value @Bt35); and UNIQ (One more interesting industry is commercial banking, which is expected to see positive developments for its second-half performance following the Thai economic recovery. It will likely gain from investment in the government’s mega-projects. Stock picks: KKP (@Bt78.50) and SCB (@Bt178)