Thai capital market ready for upswing, SCB Securities
SCB SECURITIES is still bullish about Thailand's capital market despite ongoing domestic and external turbulence as it believes the economy bottomed out in the first quarter, domestic investors have priced in risks, Thai shares are comparatively cheap, an
SCBS expects positive developments in domestic consumption, government spending and tourism along with the policy-rate cuts to support the recovery of the economy and help revive Thai stocks from the third quarter onward. It foresees gross domestic product expanding by 3 per cent this year.
SCBS also projects that the SET Index will be able hit the important milestone of 1,600 points by the end of the third quarter before reaching 1,750-1,800 points by the end of this year with a price-to-earnings ratio of around 16.5 times.
“We have told our investors to keep their chin up and fight through the storm in the third quarter as things are visibly getting better. Once the 100 points that are required to break the 1,600 mark are achieved and once the dust has settled, then the next 200 points towards 1,800 by the end of the year will be [achievable as well] ,” said SCBS senior vice president Isara Ordeedolchest.
He said that apart from the automotive and private-investment segments, the recovery of domestic consumption was satisfactory. The export sector is being helped by the depreciation of the baht, tourism is strong, and increased government spending will boost business confidence, so the economy will be much better once the private sector is revived in the fourth quarter.
SCBS expects the government to be able to disburse around 73-77 per cent of its Bt2.575-trillion fiscal budget this year.
The Stock Exchange of Thailand was trending down yesterday afternoon, after Asian stock markets were hit early in the week by the Greek tragedy and turmoil in China, but the firm still believes the SET Index cannot go much lower.
“We do not expect a hard landing for the SET. The 1,470-point level has been reached three times this year, which shows that the [bourse] is resilient against the external [factors] that have been thrown at it since the second quarter, and will continue to be able to cope in the third quarter,” Isara said.
He said thin foreign assets from the outflows since the end of 2009 meant that the visible effects from Greece and the US interest-rate increase expected in September should have minimal impact on the SET Index.
Meanwhile, the level of liquidity is still abundant from the European Union’s and Japan’s quantitative easing and China’s monetary easing policies, and this capital is expected to find its way to Thailand in the fourth quarter as the Kingdom’s economy should have picked up by then.
“The theme for the third quarter is to stick with known risks in the country as there are many unknown on the outside, so stocks with strong domestic fundamentals are what we are going look out for in the next three months,” Isara said.
The sectors that SCBS advises investment in this quarter are those in the consumer sector such as CP All and consumer lenders such as AEON Thana Sinsap (Thailand), as the expansion of consumption is concentrated on consumer products. Meanwhile the banking and energy sectors, two of the largest sectors in the SET, are expected to revive around the end of the year, and this is another factor that should be able to push the index towards the 1,800 level.
