THE benchmark stock index is expected to build on recent momentum and test the 1,600-point mark in the second quarter of this year, fuelled by inflows of foreign capital.
The strength of the Thai market has defied expectations after interest rates were raised in the US last month – the latest move in a tightening trend by the country’s central bank. Many analysts had been bracing for a fall in the Stock Exchange of Thailand Index, on assumptions of a sell-down in the Thai and other emerging markets by foreigners as a result of rising US interest rates.
However, Bt21.8 billion in foreign funds moved into the Thai stock market from March 17 to Monday, stock exchange data shows, driving the SET Index up from 1,560 points to 1,581 points. Analysts now forecast capital to continue flowing in.
Therdsak Thaveeteeratham, executive vice president for research at Asia Plus Securities, said that the SET Index would likely keep nudging towards 1,600 points, on the back of foreign fund inflows.
“Foreign capital will likely continue flowing into Thai stocks consistently. We've seen signs from early in the second quarter and long positions have opened in the futures market. This is positive for capital inflows in the future,” he said.
Prinn Panitchpakdi, managing director for CLSA Securities (Thailand), said that the Thai exchange would remain attractive to foreign investors, reflected in the steady inflows.
Some analysts are looking for the SET Index to breach 1,700 points in the next six months. Aside from the positive mood generated by the foreign fund inflows, they point to a recovery in the commercial banking sector with expectations of higher profits and declines in non-performing loans.
On the political front, some take heart from the promulgation of the new constitution as a sign that the government will keep to its roadmap for the country’s return to democracy – further boosting the confidence of foreign investors.
However, Paiboon Nalinthrangkurn, chairman of the Federation of the Thai Capital Market Organisations, said that the Thai stock exchange would likely move in a narrow range with no local support factors and more pressure from external factors.
“We need to keep an eye out for more uncertainties over external factors, particularly in the United States, where there remains a question on whether the government’s policies will be implemented as stated,” he said. “The targeted US rate rises also need to be kept on watch. There is also a risk involving the European Union’s measures for an exit from the bloc of Britain.”
On the domestic front, there are no new factors to drive the stock market, he said.
However, he shared the view that the official approval of the constitution would help boost foreign investors' confidence. The next general election is believed likely to happen in the third or fourth quarter of next year.
10 key laws
Paiboon said the drafting of the 10 key laws - especially those involving the general election - will be the key for whether the election will happen at the sooner end of expectations. If these laws were passed soon, this would help pin down the timing of the election, he said.
After this, he believes that the government will expedite its investment programme, particularly in the Eastern Economic Corridor and on other infrastructure developments.
On the foreign capital inflows, Paiboon said the amount was not that large, as the SET Index had edged up only 1-2 per cent this year. The stock market trades at the forward price-to-earnings ratio of 16 times, a reasonable level compared to those of comparable markets.
Paiboon urged investors to watch out for any market correction in the latter half of the year.
Prinn said that second half of this year would likely see further capital inflows, adding that 2017 may mark the second consecutive year of rises in net foreign purchases. “This year, foreign capital will likely chase Thai stocks over a steady period. However, these flows may be less than we saw last year,” he said.
He did not place much weight on the short-term impacts arising from any conflict with the major powers arising from geo-political tensions. Therdsak said that, based on Thailand's fundamentals, stocks will keep moving upwards. Asia Plus Securities forecasts that net earnings of listed companies will rise 7.1 per cent this year, a healthy level.