Krungsri Asset Management (KSAM) expects to see a gradual recovery in the Thai economy in the second half of the year, now that the political situation has stabilised and there is greater certainty over public spending policy.
These developments have led to an increase in both consumer and investor confidence, along with a positive outlook for the capital market as witnessed by the rising number of foreign funds in the stock and bond markets, the company said yesterday.
Chief investment officer Prapas Tonpibulsak said increased certainty over the planned increase in public investment would in turn restore private investment confidence, while the more stable political situation had already resulted in higher consumption.
The level of foreign funds has continued to increase in the past two months due to the incipient economic recovery and decreased political uncertainty and, if the flow continues to be positive in the next two months, the overall foreign fund flow this year should return to positive territory, he said.
“KSAM’s positive outlook for investment in Thailand’s capital market has increased from the expectation that the economy will gradually recover from the second half onwards, which should lift the overall performance of registered companies. Meanwhile, foreign investors’ concerns over the political situation have begun to dissipate, and recently they have come back to invest in the stock market,” he added.
Prapas said the Stock Exchange of Thailand Index had continued to rise this year, with the potential to touch 1,600 points by year-end.
However, should the market do so, it would have to adjust its base by 3-8 per cent to around 1,500 in order to maintain growth, he warned.
Moreover, the price-earnings ratio should be around 15 times at 1,600 points, which would be quite expensive, he said.
As for gross domestic product, Prapas believes the economic recovery in the second half should help boost growth to around 2.5 per cent, which is in line with the comment made by the deputy secretary-general of the National Economic and Social Development Board, who revealed last week that the agency would reconsider its previous estimate of annual GDP growth forecast of 1.5-2.5 per cent.
“Our internal GDP projection is along the lines of that of the NESDB at around 2-2.5 per cent, and we believe economic growth in the third quarter should grow around 3-4 per cent, with expansion of 4-5 per cent in the fourth quarter.
“The economy in the first quarter of 2015 should be able to grow by 5-6 per cent, and by 6-7 per cent in the second quarter, due to the economic policies that are gradually coming out from the National Council for Peace and Order, and the certainty over government spending from the acceleration of the 2014 budget and approval of the 2015 budget,” said Prapas.
He also said private investment would follow the lead of public spending, and that domestic consumption would increase along with investment.
However, high household debt will pose a constraint on the expansion of consumption and it might take some time before for the increase of investment positively affected the economy, he cautioned.
As for the baht, Prapas said the strengthening of the currency in the past one to two months due to the return of foreign funds would present an obstacle for the recovery of the export sector.
The baht also has the potential to stay on a strengthening trend, which is in line with other currencies in Asia. KSAM forecasts that the currency will be in the range of 31.50-32.50 per US dollar by year-end.
“The inflow of foreign funds in Asia emerging markets will probably continue for the rest of the year, which will pose pressure from US dollars buying baht. I believe the Bank of Thailand will most likely intervene at different periods since they do not want the unit to strengthen too much and too fast, because the export numbers this year are already not that good and the recovery of the economy is still partially dependent on the performance of the export sector,” he said.
Chief executive officer Chatrapee Tantixalerm said KSAM in the first half of 2014 had achieved growth of 23 per cent, bringing assets under management to an on-target Bt240 million.
Market share for all products has increased slightly, along with 28-per-cent growth in the size of its mutual funds and an inflow of Bt4.7 billion in long-term equity funds – the highest in the industry.