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Published on October 18, 2007

Despite the sharp fall in the stock market yesterday, the Alliance Group and Phatra Securities remain optimistic the Stock Exchange of Thailand Index will hit 1,000 points this year.

The SET Index yesterday dropped 1.12 per cent to 884.53 points on the sell-off in the Indian stock market and renewed jitters over sub-prime mortgage loans. Turnover was moderate at Bt25.4 billion.

The baht ended flat at 34.16/34.17 to the US dollar.

Germany's Alliance Group will further overweight its investment in Thailand, thanks to the clearer political picture here.

The international financial institution has about Bt500 billion invested in the Asia-Pacific, of which 15-20 per cent is in Thailand.

The Alliance Group believes in the Kingdom's economic fundamentals and will allow its local insurance unit, Ayudhya Alliance CP Life (AACP), to continue expanding this year and next.

AACP has total assets of Bt76.3 billion under its management, of which 56 per cent is in government bonds, 20 per cent in corporate bonds, 13.5 per cent in the SET and the 7 per cent in insurance-policy-backed loans. The insurer's assets are expected to rise to more than Bt80 billion this year.

"We remain confident the SET Index will climb to 1,000 points this year. Our positive view is based on three core factors, including good signs in the political environment after the recent uncertainty is relieved. As well, the country's economic fundamentals and foreign-capital inflows will also support the SET," said Asia-Pacific Alliance Group chief investment officer Nikhil Srinivasan.

Phatra Securities said in a note that the stock market could close in on the four-digit level.

"Assuming a smooth transition to an elected government after the end of the year, recent history suggests it is possible the discount could narrow to 20 per cent over the next six months, compared with almost 30 per cent now. This alone would boost the index close to our long-held goal of 1,000 points," the brokerage said.

Bank of Thailand senior director Pongpen Ruengvirayudh warned that the massive capital inflows into the bourse coupled with exporters' selling spree of US dollars had put pressure on the current baht appreciation.

However, the upward trend in the baht is not a concern, because it is in line with other regional currencies, she said. The baht is 5 per cent stronger than at the end of last year, while Malaysia's ringgit is up about 4 per cent, compared with more than 10 per cent for the Indian rupee and Philippine peso.

"Exporters do not sell dollar incomes irrationally, and the appreciating baht does not cause worries," she said.

The baht has quite been stable this year, thanks partly to the 30-per-cent unremunerated reserve requirement. That measure helped slow down the surge in the baht, which was buoyed by the foreign inflows.

The measure will be revoked only after a suitable period, as it is not causing much trouble, she said.

Businesses expressed confidence in domestic demand recovering during the rest of the year, following a Bank of Thailand business survey showing some exporters had received higher orders.

Most of them were ready to up their investment if the post-election political situation calmed down, the survey showed.

ING said in its quarterly investor-sentiment report that 67 per cent of local stock players thought the market would rise within the next three months.

"While Thailand investors' view of the economic situation in the past three months was the lowest in the region, their outlook for the next three is more optimistic," the paper said.

Somruedi Banchongduang

 Anoma Srisukkasem

 The Nation