Following government's announcement of the national election date on March 14, the Thai political development is moving in the right direction with foreign capital expected to return to the Thai stock market.
Foreign holding of Thai equities has been declining for the past six years, sliding from 30 per cent to 22.68 per of the SET’s market capitalisation at the end of last year.
A return of foreign capital could lead to PER re-rating from 14 times to our estimated 16 times this year or the SET Index at 1,780-1,705 points.
The Thai stock market has been under pressure from the redemption of LTFs in the
current quarter, with this year being the last time investors will be given tax privileges for the purchases. There will be no new LTFs entering the SET next year while existing funds, which have reached holding conditions, will exit the market.
The situation could lead to higher-than-normal LTF redemption.
External pressure could come from Brexit with the UK possibly leaving the European Union on March 29, the March 29-30 FOMC meeting, and the longest US government shutdown in history. The FOMC is expected to leave the fund rate unchanged but its position on rate direction this year should be watched.
The SET Index is expected to rise but investors should be mindful of short-term profit-takings. Our picks for the week: KBANK, BJC, STEC , WHA and AMATA (fundamental stocks which could gain from the election).
Executive Vice President/Research
Asia Plus Securities
Poll could see return
of foreign capital
The poll schedule helped boost investors'confidence while attracting foreign funds with a policy of investing in countries with a elected government.
In the four elections since 2001, the SET Index rose on average 1.8 per cent on the day before the election date, 3.7 per cent in one week after the election, and 5.1 per cent in one month after the election.
Several sectors ranging from property, banking, financial, insurance, energy, retail, hospital and communications led the rises.
Besides, an election usually attracts more foreign capital. And in the previous four elections, the baht appreciated during the election. Stocks of listed companies which import raw materials or have high foreign-denominated debts will gain from the baht appreciation.
KS Research still expects the SET to continue its recovery. Based on investment strategy during this year’s election, We recommend domestic plays in consumption such as CPALL and BJC, and construction stocks which will benefit from new bids for projects and have lower construction materials, including STEC.
Deputy Managing Director/Research