THE Thai stock market pushed deeper into record territory yesterday, driven by a buying spree in big energy stocks.
While investors cheered another trading record on the Stock Exchange of Thailand (SET) Index, the country’s central bank urged businesses to hedge against foreign exchange risks resulting from a strengthening baht.
The benchmark index closed at 1,795.45 points for its third straight day of gains in the first trading week of the new year. The SET edged up 4.43 points, a rise of 0.25 per cent.
Trading turnover was Bt87.5 billion. During the day the index went as high as 1,803.93 points, the most since its intraday peak of 1,789 points on January 5, 1994.
Yesterday’s gains on the SET Index followed the strong buying in energy stocks, with their appeal boosted by rising crude oil prices. Elsewhere in the region, markets climbed on bright German and US economic data and crude’s ascent to its highest price in two and a half years.
“The local stock has been boosted by a global synchronised economic recovery, taking in the US, Europe, Japan and emerging markets including Thailand,” said Pipat Luengnaruemitchai, assistant managing director of Phatra Securities.
The prospects for the Thai economy also look good this year with low inflation likely.
Phatra projected the SET Index would reach 1,820 points this year, a mark it is getting ever closer to, he said. He said he would not be surprised if the index reached 1,900 points, as that would only be 5 per cent higher, and a 15 per cent movement for a year is common for the stock market.
As for whether stocks are too expensive, he said the index’s price-earnings ratio is relatively high at about 16-17 times, compared with past levels. During the political turmoil caused by the stand-off between supporters of the red shirt and yellow shirt movements, this ratio was only nine times, he said.
Thai investors still prefer stocks to bonds, given the low returns on debt instruments, Pipat said.
Other markets around the world also surged yesterday, with the Dow Jones Industrial Average reaching 25,000 points in New York on Thursday, he said.
However, he warned that the Thai market faced the risk of a correction.
If the global economy does not do as well as predicted or the earnings growth of listed companies misses targets significantly, then the market could go down, Pipat said.
He said that private investment in Thailand had not yet increased as much as expected. Other key risks include tensions on the Korean peninsula, political instability in the Middle East and uncertainties over US trade policy, he said. Interest rate rises by the US Federal Reserve and European Central Bank also hung over the market.
The value of the baht has increased along with the stock market.
The Bank of Thailand’s (BOT) deputy governor Mathee Supapongse said that the baht had appreciated in line with its regional peers from the start of 2018, but had moved relatively quickly against the US dollar.
The baht appreciation resulted from the US dollar's depreciation this year and foreign capital flowing into stock and bond markets across the region.
The central bank has been monitoring money market movements closely and if the Thai currency shifts too swiftly, the private sector may be affected, Mathee said. But he added that the BOT was ready to respond if needed.
He said that the private sector should use the proper tools to hedge against foreign exchange risks. Such hedging tools include the purchase of foreign exchange options and the use of local currencies that move in line with the baht, instead of the US dollar, for payment to foreign currency deposits or for future payments.