Krungsri Group expects domestic consumption to be the key engine driving the Thai economy in the second half of this year rather than exports, so investors should focus on "domestic plays" to gain profit.
At a seminar held by Krungsri, Roongsak Satutum, senior vice president for the research department of the risk management group at Krungsri (Bank of Ayudhya and its subsidiaries), said improvement in the global economy was unlikely to benefit Thailand much.
The US economic recovery has not shown that the country will have high demand for imports. The United States is adjusting its import-export balance, he said, which is bad news for countries that rely on export markets.
The research department believes Thai export growth for the whole year could reach 1-3 per cent, but Roongsak said the key economic engine in the second half would be domestic consumption while a functioning government is in place.
“There has been pent-up demand since the second half of last year, so we can expect people to begin spending in the second half of this year. Spending on durable goods will be seen in this period as well,” he said.
Tanadech Rungsrithananon, vice president of the research department of Krungsri Securities, said the securities firm suggested investors make “external plays” in February because of the political uncertainty at home. But after the arrival of the military’s National Council for Peace and Order, the picture of domestic consumption has changed, so “domestic plays” will return to the investment spotlight.
Stocks in domestic plays are led by commercial banks and property construction, he said, but stocks in the telecommunications and energy sectors are underweight for Krungsri Securities because of uncertainty over the licensing of fourth-generation cellular services and energy-policy reform.
He said that although the SET Index had passed 1,500 points, there could be a correction in the third quarter from outflows of funds moving into US stocks. Still, the Stock Exchange of Thailand could rebound in the fourth quarter, so Krungsri Securities has not changed its SET Index target for this year of 1,487 points.
The index in 2015 could stay around 1,580-1,600 points as the economy returns to sharp growth. Krungsri Group projects gross domestic product to grow by 5 per cent next year, Tanadech said.
Prapas Tonpibulsak, chief investment officer at Krungsri Asset Management (KSAM), said on the sidelines of the seminar that institutional investors had positive sentiment on the Thai stock market and were planning more investment in the remaining months of the year. KSAM foresees around Bt50 billion from institutional investors, up from Bt40 billion in the first half.
KSAM will adjust its investment portfolio in the second half by increasing weight on property stocks to deal with the rising domestic consumption. Property investment in KSAM’s portfolio is relatively low at less than 10 per cent, so the company can expand in this category.
It would underweight investment in telecommunication and energy, however, given the uncertainties faced by those sectors.