Executive Vice President / Research Department
Asia Plus Securities Company Limited
Much under-owned foreign holding of Thai stocks, continuous capital inflow expected.
Here we go again: Since August 29, total foreign purchases of Thai stocks totalled Bt18 billion with net sales in four days, signalling that the Thai bourse has again been driven by foreign capital.
An interesting question is whether or not foreign investors will continue their net purchase in the Thai stock market.
At the end of this August, foreign holdings, in their names, of Thai stocks was nearฌly 24.2 per cent and NVDR nearly 6.8 per cent, totalling 30.9 per cent, the lowest figure since mid-2004 and lower than its high of nearly 35.9 per cent in early 2012.
Now, foreign stakes in Thai stocks are under owned. From 2009 to mid-2013, net foreign purchase of Thai stocks topped out at Bt470 billion. After that, concerns over the Fed’s moveฌment on its QE and US benchฌmark rate prompted a continuous selling spree until the Bt470-billion net accumulated foreign purchase declined to nearly zero in late 2015.
After that, only a small amount of foreign purchases occurred in 2016. Now, net accumulated foreign purchases of Thai stocks amounts to Bt110 billion, relatively low compared to that previous high of Bt470 billion.
If no new concerns arise, it’s possible for more foreign capiฌtal to move into the Thai stock market. If its PER (Price Earnings Ratio) is rerated to 16.77 times, the SET Index will touch 1,700 points.
Signs suggesting increased Thai economic growth and progress on the draft EEC development bill also attracted foreign capital.
Stock picks: WHA, AMATA, HANA, GFPT and PTTEP
Forget about the rate cut.
Pressure on the Bank of Thailand (BOT) seemed to ease following the September 20 Federal Open Market Committee (FOMC) meeting that decided to maintain its monetary tightening.
The Thai central bank has also been supported by the best export figures in 55 months. KResearch expects Thai exports to achieve targeted growth of 7.0 per cent for the whole of this year after an 8.9 per cent increase in Thai exports for the first eight months.
Thai exports grew satisfactorily to all major destinations including the US, China, Japan and CLMV. Exports excluding gold expanded 10.3 per cent Year on Year (YoY) in August.
Shipments of agricultural products rose for the 10th straight month led by rice, rubber, sugar, and frozen seafood, while shipments of manufacturing products increased for the 6th straight month.
Thai imports of machinery and components advanced 8.8 per cent YoY in August and imports of electrical machinery advanced 5.5 per cent, reflecting rise in domestic investment.
Although the Ministry of Finance asked the BOT to be wary of baht appreciation, presฌsure on the BOT for a rate cut eased after satisfactory Thai exports figures and the recent FOMC meeting results, which prompted the US dollar to appreciate and bond yields to rise across the world.
We expect the MPC to put the Thai policy rate on hold at 1.5 per cent in its meeting on Wednesday.