CAPITAL TIPPED TO HEAD TOWARDS SAFE HAVENS

  Therdsak Thaveeteeratham
Executive vice president / research
Asia Plus Securities
Capital movement should be closely monitored and will define the Thai stock market’s price earnings ratio (PER) on whether it will be driven up from its target of 16 times. Every one-time PER increase, the SET Index will equivalently rise by 101-102 points from its earlier target of 1,622 points.
We expect capital to head to safe-haven assets such as bonds or gold due to concerns over tensions in the Korean Peninsula and expectations of no rate hikes in Thailand or the US this year.
When capital moves into bonds, bond prices will rise and yields will fall. Thus, the market earning yield gap will widen and the market risk premium will be higher, which will make stock investment more attractive.
When the SET Index stays in a targeted range, focus on selective buys in laggard stocks with positive sentiment. Picks: BA, COM7, BCH. All are expected to record higher results in 2H17 than in the first half.

Prakit Sirivattanaket
Vice president
Kasikorn Securities
Market tensions in the US have been easing after politicians agreed to extend the debt ceiling to December 15, allocate funds to help victims of Hurricane Harvey and set a temporary budget for the US government.
Other positive issues for risky assets include signs of the Fed’s postponement of its expected benchmark rate hike and the resignation of its vice chairman, Stanley Fischer. If the Fed’s next vice chairman is more of a dove, there could be further support for a US rate hike postponement. Then, bond yields across the world would decline.
Statistically, the Thai 10-year bond yield will move in the opposite direction of the forward PER, with a correlation of -0.64. Therefore, the downward trend of the yield curve will support the SET Index to trade at higher forward PER than the current ratio. KS Research expects the SET Index to rise to test a target of 1,650 points.