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SET Forecasts

'Increase in investment to keep driving SET in H2'

Brokers agree that the Stock Exchange of Thailand is on the rise thanks to an expected increase in investments in the second half of the year, led by government spending, but they are still wary of the effectiveness of the second phase of the junta's economic policies.

The SET Index also has the potential to reach 1,580-1,600 points by mid-2015 or 12 months from now, said Sukit Udomsirikul, managing director of the research department of Maybank Kim Eng Securities (Thailand).

He added that the economy had passed the riskiest point and would recover fully by the fourth quarter on higher investments, exports, and the approach of the tourism high season. Growth in gross domestic product could hit 2.5 per cent this year.

Sukit noted that government spending had been back on track under the military's National Council for Peace and Order (NCPO), while exports to China and Asean countries, especially CLMV (Cambodia, Laos, Myanmar and Vietnam), were improving.

However, the recovery of domestic consumption will be slow because of high household debt and low crop prices.

"The heart of the economic recovery from this point onward is investment by the public and private sectors," he said. "Since the NCPO has taken over administrative power, the pace of government spending has been faster, and the 2014 and 2015 budgets will be crucial for the country's economic growth."

ML Thongmakut Thongyai, chief executive officer of SCB Securities, said SET market volume in the first six months had dropped to between Bt28 billion and Bt32 billion, down by 27 per cent year on year, but rapidly bounced back after the May 22 coup to around Bt40 billion. SCBS expects the volume to stay between Bt38 billion and Bt45 billion in the current half, for a whole-year average of Bt35 billion, and a SET Index at 1,600 points by year-end.

He also expects earnings per share in the SET to average 12 per cent this year and the current price to earnings (P/E) ratio of 18 times to drop to 15 times by the end of the year.

"Right now there is certainty that the Thailand will grow and the economy is getting better, while many policies such as infrastructure projects and clarity in the budget disbursement [state spending] will continue to drive the economy. And the environment in the country's stock market will continue to be bullish because of it," he said.

"The economy is getting better and domestic consumption is increasing, but we have to wait and see how the NCPO will execute its plans" in the next phase.

However, Sukit warned that while the stock market has recovered from all the good news, it would probably see adjustments in the current quarter because it has reached a high level when compared with other countries in the region.

Meanwhile foreign investors are returning to venture in Thai stocks, and they are expected to be back in full force after a new government has been established.


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