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UOBAM sees continued SET growth, rising EPS

THAILAND'S CAPITAL MARKET has the potential to continue growing in second half of the year, while the earnings per share (EPS) of companies listed in the Stock Exchange of Thailand could expand by 12 per cent this year, UOB Asset Management (UOBAM) said yesterday.

Vana Bulbon, UOBAM chief executive officer, said SET-listed companies had the potential to grow by 10-12 per cent this year, which was better than the asset-management company's previous prediction of 7-10 per cent before the change in government as a result of the military coup in May.

The return of domestic consumption, investment and purchasing power due to the National Council for Peace and Order's economic-stimulus package and public-investment road map, along with the return of foreign funds, will boost the market over the remainder of the year, he said. UOBAM also predicts that the stock index's EPS will grow by 12-15 per cent in 2015.

"The country's strong financial foundations counterbalanced the political uncertainty at the beginning of the year, and domestic investors maintained confidence in the market, which led to companies' EPS continuing to grow despite the turmoil during the first five months.

"Meanwhile, the faster-than-expected ending of the political turbulence will bring back investors' confidence along with investment, which means that the index's EPS has the potential to expand to 12 per cent by the end of the year," he explained.

UOBAM sees these positive domestic factors pushing the SET Index up to at least 1,550 points by year-end, and to 1,600 points by the second half of 2015, said Vana, adding that EPS growth in domestic retail and financial-institution stocks was most apparent as a result of increased domestic demand.

The size of mutual funds in the entire market also managed to grow, by 17 per cent (around Bt500 billion) in the first five months, while there was smaller growth within providence and private funds despite the political turbulence. The entire industry will continue to grow in the next period, he predicted.

As for foreign investors, Vana said they had been selling off their stocks since the end of last year, and that the outflow of foreign funds had been on up upward trend all the way up to the declaration of martial law and the subsequent coup.

However, just a few weeks after the coup, the positive sentiment of domestic players began to increase foreign investor confidence, and there have been signs of foreigners buying back into the SET ever since.

"Once the SET index goes beyond 1,450 points, more foreign investors will begin to buy back into Thai stocks and the amount of foreign investment will increase, since most of them had already fallen off the train by selling out their shares at the beginning of the year - and now they will have to make up [lost ground] while the market is on the way up," he said. The SET Index ended the day at 1,491.81 points yesterday, up 6.06 points or 0.41 per cent. Trading value was Bt47.16 billion. Foreigners were net buyers to the tune of Bt627.72 million, with institutions also buying in at Bt815.88 million.

However, despite the positive outlook, Vana said that if the economic road map of the NCPO did not turn out the way it should and if investments along with foreign funds did not increase as expected, UOBAM saw the SET Index's downside for this year as 1,430-1,450 points.

The company's projection for the Kingdom's economic growth is 2 per cent for 2014 and 6 per cent for 2015, which is higher than the Bank of Thailand's prediction of 1.5 per cent and 5.5 per cent respectively.

Apart from the domestic market, Natcha Suntorntarawong, senior director of business development at UOBAM, said that since the world economy was continuing to recover, UOBAM would continue to have a positive outlook on stocks in developed economies, especially in Europe and Japan, because of the potential of a good return on investment from those countries' gradual economic recovery.

ECB

She said the European Central Bank would continue to stimulate the European Union's economic growth, but expansion would be slow due to low inflationary pressure and a stronger currency.

Meanwhile, the effect of an increase in the value-added-tax rate on Japan's consumption has been lower than expected, which means that the Japanese economy will continue to grow due to the successful implementation of Prime Minister Shinzo Abe's economic policies, she added.

Natcha advises investors to keep an eye on stocks among Japan's small and medium-sized enterprises, since their performance is continuing to grow and they have received the most benefit from the "Abenomics" policy of concentrating on domestic consumption and investment.

She expects the EU's capital market to grow by another 10-15 per cent this year, on top of the 17-per-cent growth seen in the first five months.


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