SET index, at 18-year high, may rise further

Share and bond markets benefit from positive indicators, lack of intervention

Thai shares were traded yesterday at the highest level since 1994, with the Kingdom having attracted US$4.3 billion (Bt128 billion) in foreign capital inflows so far this year with little intervention from the financial authorities.

Positive economic indicators are drawing "hot money" into Thailand and elsewhere in Asia, in search of higher yields than those offered by developed markets. This has boosted Asian shares, bonds and currencies.

On the Stock Exchange of Thailand, foreign net-buys yesterday totalled Bt864 million, boosting the year-to-date net-buys to Bt16.87 billion.

Some Bt100 billion has gone into the bond market this year.

The SET Index closed at 1,506.37 points yesterday, which is 19.7 times the prospective earnings of listed companies. In the year to date, the index is up 7.7 per cent.

The MSCI Asia Pacific Index yesterday added 0.5 per cent, showing regional gains.

At the close, the SET's market capitalisation hit Bt12.8 trillion, leading to anticipation that the Thai market's weight in the MSCI will be raised this week.

"Due to excess liquidity in the US, funds are flowing to risk assets [including stocks]. In the past four weeks, turnover of ETFs [exchange-traded funds] in the US was the highest since 1996. The Thai market just benefits from the buying spree," said Prakit Siriwatanagase, a strategist at Asia Plus Securities.

He believes the index could rise further, with the next resistance line at 1,525 points.

Securities and Exchange Commission secretary-general Vorapol Socatiyanurak insisted yesterday that no new rules were needed to tame stock speculation. However, brokerage houses are required to maintain strict rules on margin loans and learn more about clients' risk appetites.

Last month, the exchange also issued a warning together with a list of 60 stocks which have seen their prices jump the most in the past two months.

Due to foreign capital inflows, the baht is hanging below 30 per dollar, and exporters are requesting intervention either through a rate cut or a capital-control measure.

At the opening of trading yesterday, the baht was 29.78 per dollar, after touching a 17-month high of 29.66 last Thursday.

With Asian central banks now refraining from intervening in the markets, more inflows are expected to come, given the regional resilience.

The Bank of Thailand last month raised its 2013 growth forecast for the Kingdom to 4.9 per cent, from an October estimate of 4.6 per cent.

"Economic news was universally good," said Matthew Sherwood, head of investment markets research at Perpetual Investment, which manages about $25 billion in Sydney.

"Corporate leaders are becoming more confident about the growth outlook. Investors are starting to feel the same way, even though questions remain about the strength of corporate earnings growth," he told Bloomberg.

According to Nomura Research, Asia is on track to a brightening economic outlook on four main drivers: stronger exports; still very loose domestic monetary and fiscal policies in most countries; the start of an inventory restocking cycle; and strong net capital inflows.

"That said, it remains highly uncertain how long Asia's incipient growth upswing will last given the many hurdles ahead, including our view that China needs to - and will - move soon to less-accommodative policies, unresolved fiscal issues in the US and the risk of continued yen depreciation," the research house said.

This week, Moody's Analysts expects Indonesia to announce 6.3-per-cent economic growth for the fourth quarter of last year, while Malaysia's trade surplus is likely to widen.