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Gloomy outlook for SET, baht in '14

Foreign investors' appetite for Thai equities will decline and the baht will tend to weaken further in light of capital outflows and weak export growth, analysts said, offering a discouraging outlook for the new year.

Stock analysts at 21 research houses forecast the SET Index ending 2014 at 1,534 points, down from the July forecast of 1,700 points, chiefly on the political uncertainties. The SET next year is expected to peak at 1,623 and bottom out at 1,271. It closed yesterday at 1,332.45. All of the analysts rank political instability as the greatest risk. The election outcome, as well as the prolonged anti-government demonstrations, must be closely monitored, as they would have an impact on the economy. The positive factors next year are the recovery of the global economy and the expected growth of the profits of listed companies.

Porranee Thongyen, vice president of the Securities Analysts Association, which conducted the survey, said yesterday that it was hard to predict when the political uncertainty will end. What is clear, however, is that foreign investors, accounting for some 20 per cent of the market's capitalisation, have continued to dump Thai stocks when in normal times the sell-off would cease in September or October. Their retreat has also affected the baht's value and this indicates that the political factor has affected the baht and their investment decisions.

If the situation does not improve in three months, foreigners might not re-enter the Thai

market, she said. Capital outflows are pressuring

the dollar/baht exchange rate, which yesterday ended at 32.75 per dollar, the lowest level since March 2010.

Bank of Thailand Deputy Governor Pongpen Ruengvirayudh said political instability is the most important domestic factor to influence the rate next year. As it is still being debated whether the election should be held on February 2, she said a positive response from foreign investors can be anticipated if all parties reach a compromise and decide to postpone the election.

The baht has been under pressure from capital outflows. Foreign investors have sold Thai shares worth over a net Bt190 billion this year. They also pulled some investment from Thai bonds.

Thailand is expected to run a trade deficit of over US$20 billion (Bt655 billion at the current rate) this year, as exports may not show any growth from last year. The outlook for next year depends largely on the global recovery and confidence among local manufacturers.


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