This is a phenomenon in which foreign investors jump on the bandwagon to pile up shares each January.

Adisak Kammool, vice president for economics and strategy research at KGI Securities (Thailand), said the strong gains in the Dow Jones Industrial Average Index reflected shifting investment from debt instruments to the equity market after a pause in Fed Fund rate hikes.

"Over the next 18 months from June [the last time the Federal Reserve raised its key rate to 5.25 per cent], the Dow Jones Index will mark further historical highs. This will prompt foreign investors to review their asset allocations, and the Thai stock market will reap the windfall," he said.

"A January effect is possible this year," he added.

Thai shares yesterday surged 0.3 per cent, with foreign investors snapping up bank shares, because they were optimistic that loan growth would improve following the more stable political situation and falling oil prices.

The Stock Exchange of Thailand (SET) Index began the day with a gain and moved in positive territory for the entire day. It closed yesterday at 720.87 points with a moderate turnover of Bt15.34 billion.

Banking stocks increased across the board led by Siam City Bank, which jumped 5.29 per cent to Bt21.90; Siam Commercial Bank, up 3.08 per cent to Bt67; Bank of Ayudhya, up 1.08 per cent to Bt18.80; Bangkok Bank, up 0.88 per cent to Bt115; and Kasikornbank, up 0.72 per cent to Bt70.

ABN Amro Asia Securities analyst Therdsak Thaveeteeratham said the historical high in the Dow Jones Industrial Average Index would boost sentiment for the Thai stock market.

However, SET gains are limited, due to an unchanged economic structure.

Therdsak was pessimistic that the new high in the Dow Jones Index might stall investment in other countries and shift to the US market, due to attractive returns.

Although the SET's price-to-equity ratio of about 9 is relatively low compared with other markets, the rate is suitable for the country's gross domestic product.

Therdsak predicted SET gains next year would be limited, because listed companies' earnings-per-share growth would decline to 0.62 per cent, from 3.7 per cent this year.

Siriporn Chanjindamanee

The Nation