Stock gurus sweet on Thai sugar shares amid global short supply
The price of sugar shares continued to rise on Monday after the global sugar price hit 14 cents per pound over drought fears, up 50 per cent from its low point in April.
On Monday, shares in Khon Kaen Sugar Industry (KSL) rose 10.92 per cent to Bt2.64; Khonburi Sugar (KBS) rose 7.09 per cent to Bt3.32; Buriram Sugar (BRR) rose 9.15 per cent to Bt3.10; and Kaset Thai International Sugar Corporation (KTIS) was up 5.18 per cent to Bt2.84.
Prasit Sujiravorakul, Bualuang Securities' director of institutional client research, said the shares shares rose after the global sugar price hit a seven-month high of 14 cents, adding that the average export price also rose both quarter on quarter and year on year, to Bt11,811 per tonne.
"The global sugar price has risen gradually since its low point of 9.2 cents per pound in April, in response to uncertainty over La Nina which caused drought in Brazil and Argentina, as well as risks of forest fire," he said.
"The sugar supply is expected to fall by about 7 per cent, with rainwater volume forecast to drop by 5-20 per cent. Meanwhile, the chance that La Nina will last until the first quarter of next year is 70-90 per cent."
Given the above factors, he advised investors to speculate on Thai sugar shares, reasoning that the price will rise in line with the global price. KSL expects the sugar price to move between 11.5 and 13.5 cents per pound this year.
"We expect the price of sugar to hit 15 cents as the La Nina impact deepens [next year], but it won’t rise any further as supply will increase by 10-15 per cent when India, China and Brazil emerge from drought season," he said.
He added that positive sentiment will boost sugar companies' performance in the next two quarters because the sugar price is usually set in futures contracts.
"In Thailand, sugar companies make new contracts around March and April every year," he said.
Naree Apisawaittakan, Phillip Securities (Thailand)'s assistant managing director of securities analysis, said the value of sugar shares had now risen above their base price.
"The rise in share prices reflects the rising global sugar price due to uncertainty over dry weather, which triggered mass buy-ups in shares by speculators," she said, adding that the price of soybean had risen on the same uncertainty.
She advised investors to buy the stocks for short-term speculation, saying Phillip Securities would adjust its forecast for sugar stocks if the sugar price continues to increase.
