Stock Exchange of Thailand (SET) chairman Vijit Supinit admitted yesterday that significant appreciation of the baht is having an impact on listed companies.

However, he described the impact as "minor".

The stronger currency has affected the earnings of listed companies, particularly this month, in which the baht has been much stronger, and listed firms' earnings may not grow as much as earlier estimated, he said.

However, he believes the impact will not be very severe and listed companies' earnings growth this year will be around 10 per cent.

"Personally, I believe the impact will not be significant as most exports are to Asian markets," Vijit said.

"The baht has been stronger, in line with regional currencies. Therefore Thai exporters have not lost much competitiveness to neighbouring countries."

He believes the earnings growth of listed companies will improve next year. The target figure for the SET Index in 2007 is 800 points.

Asia Plus Securities chief executive and Federation of Thai Capital Market Organisations chairman Kongkiat Opaswongkarn said the capital influx condition will last long into next year, given the state of worldwide liquidity.

The foreign reserves of emerging markets are expected to rise continuously, while those of developed countries will tend to decline, he said.

Among 27 emerging countries, China has the largest foreign reserves, with 34 per cent of the combined foreign reserves of all 27 countries of US$2.7 trillion (Bt95.15 trillion).

Thailand ranks 11th on the list.

Kongkiat said the downward trend of oil prices will alleviate pressure on oil-dependent countries, including Thailand. The weakening price of oil will ease inflation and interest rates will tend to drop as a result.

The interest-rate trend can already be seen in the US Federal Reserve's decision to pause its key interest-rate hikes, he said. Reductions in domestic interest rates will follow the appreciation of the baht and the tamed inflation rate.

Kongkiat predicted that the SET Index would move in a range of 667-889 points next year, based on a price-to-earnings ratio of 9 to 12.

Persisting capital inflows, improved inflation and downward interest-rate trends will all be positive factors driving the Thai stock market.

Risk factors will include political issues and the possibility of both banks' capital increases and exports being hurt by the stronger baht.

Also, a global economic slowdown and declining growth in the US real-estate market may also harm Thai exports, which are the main engine driving the country's economic growth, he said.

"The stock market is an alternative for investors who expect higher returns than debt instruments," he added.

Kongkiat said that of Thailand's commercial banks, Krung Thai Bank and TMB Bank are the most likely to have to raise fresh funds next year to comply with the International Accounting Standard, IAS 39.

He said banks, retail firms, household-goods manufacturers and basic-infrastructure and construction companies - particularly those with experience in building power plants - would show stunning earnings growth next year.

Siriporn Chanjindamanee

The Nation