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Move on NVDRs expected to draw foreign capital to SET

Apr 21. 2019
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By The Nation

Investment analysts expect foreign capital to flow into the Thai bourse next month, driven by MSCI’s planned inclusion of non-voting depository receipts (NVDRs) into its emerging markets index.

Aside from the US Federal Reserve’s policy of monetary easing, signalling no interest-rate rise for the rest of the year, global index provider MSCI’s plan to include NVDRs, a class of shares held by foreigners, in its closely watched emerging markets index would boost demand for investment in emerging-market assets, said Visit Ongpipattanakul, managing director of Trinity Securities.

 Should MSCI go ahead with the plan, foreign funds with reference to the MSCI Index would likely increase their weighting of Thai stocks in their portfolios with an estimated amount of about Bt60-Bt70 billion into the Thai bourse, given the large number of foreign investors holding Thai stocks through NVDRs, he said.

 Thai stocks make up about 2.5 per cent of the MSCI Emerging Markets Index. NVDRs are depository receipts issued by Thai NVDR Co Ltd.

 Wijit Arayapisit, investment strategist of Maybank Kim Eng Securities (Thailand), said that short-term foreign capital will likely flow back into the Thai stock market in May due mainly to MSCI’s “rebalancing to increase its weight in Thai stocks”.

 Kitpon Praipaisarnkit, a strategist at UOB Kay Hian Securities (Thailand), expects net buy of Thai stocks by foreign investors, given the likelihood of MSCI’s inclusion of NVDRs and the formation of a new government.

 “It’s difficult to evaluate capital movement of foreign investors who net sold nearly Bt300 billion of Thai stocks last year. If foreign capital flows back, there must be contributing factors such as political stability,” Wijit said. 

Foreign investors who net sold Thai stocks are expected to net buy Thai equities this year, he said. 

Tisco Securities expects foreign investors to net buy Bt50Bt80 billion worth of Thai shares this year. Its estimate of this year’s earnings per share (EPS) has been cut to Bt123 due mainly to the expected impact on Thai exports and tourism in light of the global economic slowdown. It projected the SET Index to end at 1,790 points this year.

 UOB Kay Hian Securities (Thailand) revised down its prediction of this year’s EPS to Bt118. It projected the SET Index to end the year at 1,800 points.

 Trinity Securities cut its estimate of the 2019 market EPS to Bt108 early this month after listed firms were required to increase their provisions as a result of the new legal requirements, while Maybank Kim Eng Securities (Thailand) slashed its forecast of this year’s EPS to Bt113.50 from Bt116 estimated earlier.

 Trinity Securities forecast the SET Index to reach 1,780 points at the year-end while Maybank Kim Eng Securities (Thailand) expects 1,730 points.


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