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Net export growth to lift Thai economy in 2014: Aberdeen

Thailand will have a positive outlook for next year from the economic recoupling through net export growth as a positive market contributor, while the country's gross domestic product (GDP) is expected to stay within 3-3.5 per cent range for 2014, according to Aberdeen Asset Management.

Thai exports should be among the first to gain from the economic recovery in the US, the European Union, China and Japan, Abderdeen said, forecasting exports to grow by at least 7 per cent in 2014. This will compensate for slower domestic growth led by a slowdown in credit after a two-year consumer lending boom.

"Thailand's economy has several points in its favour: the region is emerging gradually from a weaker patch, helped by China, improving demand in the US, and regional trade initiatives," said Pongtharin Sapayanon, Aberdeen's head of fixed income in Thailand.

"From a fixed income perspective, technical factors in the form of falling levels or foreign ownership of Thai sovereigns means valuations are attractive, plus currency may have found a floor," he added.

Politics will continue to be a cause for uncertainty in Thailand, according to Aberdeen, but if there is no violence, it should only have a minor impact on the economy next year.

Aberdeen expects Thailand's GDP to grow by 3-3.5 per cent in 2014 but much will depend on whether the recent House dissolution will defuse the current political tensions. Foreign direct investment and tourism, which contribute 3-5 per cent and 10 per cent respectively, have stayed buoyant despite the political crisis.

According to Aberdeen's short-term outlook for 2014, the market valuation is fair with positive price-to-earnings of 13.3 times and a 3.1-per-cent yield. Externally, the risk of the US Fed tapering its quantitative easing (QE) remains but markets should be more resilient due to management of expectations, lower foreign ownership of bonds, and reasonable bond price. The baht is expected to be cheap (Bt32-Bt33 to the US dollar) next year because of the stronger dollar through QE tapering and the subsequent increase in interest rate.

Domestically, Aberdeen hopes to see an improvement in the economy supported by rising external demand and infrastructure building. However, the Bt2 trillion spending on infrastructure is a story for 2015, as it will not be implemented in time for next year. Aberdeen also believed that domestic consumption will remain muted for a while as household debt levels are still relatively high.

Adithep Vanabriksha, Abderdeen's chief investment officer, believes that corporate balance sheets in 2014 will remain very strong. There might be some challenges in seeking value next year but corporates are expected to deliver some earnings growth because of the high confidence in the ability of management to deal with challenges, he said.

"We believe that stocks are fairly valued now, with the SET on a forward value of 13.3x and forward price/earnings. Of course, we have heard a lot about tapering risks, and these remain in the form of potential price volatility amid disruptive fund flows," said Adithep, "Dividend backing is good and corporate balance sheets look solid enough. We expect exports to lead an uptick in growth, with public works - if they still go ahead - helping the domestic economy," he added.

Adithep said Aberdeen maintained its policy of investing in equity or equity-related securities for medium to long-term return therefore assets under management (AUM) growth is not as important as profit growth. Aberdeen's AUM as of November 2013 was Bt37.782 billion.

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