Smaller companies come into focus
THE SECOND half of this year is arriving with various views on the Thai stock market. Asset Plus Fund Management’s view is for the SET Index to move in a narrow range and still have quite limited upside due to domestic consumption growing less than expected.
Targeted SET Index at the end of this year would be in the range of 1,600-1,650 points.
However, it is believed that the market in the latter half would be driven by positive signs from the disbursement of the government budget, state investment, the export recovery and the tourism industry’s improvement.
Amid a market that needs to be driven by new factors and has big cap equities that are not skyrocketing, not only are stock |selection and timing still the recommended strategies, but also small- and mid-cap stock picking.
The FTSE Thai Small Mid Cap Index (TRI) yields 12.78 per cent per year, higher than the SET50 TRI Index, which yields 6.71 per cent, according to Bloomberg as of July 4.
Yields are calculated from December 31, 2014 to June 30, 2017.
Asset Plus Fund Management forecasts these listed companies’ earnings rising 9 per cent this year and 11 per cent next year.
Compared with the potential and earnings growth trend, their current values are still interesting. This would be a good opportunity to add small-mid-cap equities into your portfolio for a high expected return in the long run.
Concerning stock selection, those interested in small-mid-cap stock investment should focus on companies with high growth prospects.
Clear and effective business models, expanding customer bases, including strong branding strategies and focus on customer engagement, are also significant factors that should be emphasised.
The small- and mid-cap equities of the businesses benefiting from the digital economy, purchasing power of Chinese consumers and expansion of CLMV economies, as well as companies that will profit from household debt reduction efforts, are what we recommend for risk appetite investors interested in finding opportunities in the small-mid-cap equity market.
For investors with high risk appetite, but who may not be familiar with market timing and stock selection, investing in professionally managed mutual funds that invest in Thai small-mid-cap equities are highly recommended.
For investors with moderate risk appetite, there are still choices to invest in balanced funds with a flexible strategy for investing in various assets such as Thai equities, REITS, infrastructure funds, fixed-income and the Asean equity market, which is also an interesting destination.
Asean economies are still robust. The latest IMF forecast is for Asean GDP to expand 5.1 per cent next year, faster than the US, which is expected to pick up only 2.5 per cent.
In our view, there are high-expected-return opportunities in the Vietnam and Philippine markets due to their strong economic growth.
Investment entails risk. Investors should thoroughly study prospectuses, funds features, return conditions and risk before investing.
Contributed by Asset Plus Fund Management
