Se­cu­ri­ties firm warns of 5-year cap­i­tal out­flow high

The Myanmar Times - Weekend - - International | Business -

CAP­I­TAL out­flows from Thai­land’s stock mar­ket are ex­pected to per­sist and could reach a five-year high of 200 bil­lion baht this year, mainly due to the US’S macroe­co­nomic poli­cies, says Asia Plus Se­cu­ri­ties (ASP).

With such a bear­ish pro­jec­tion, the Stock Ex­change of Thai­land (SET) index could plunge to 1,500 points in the com­ing pe­riod, with the baht de­pre­ci­at­ing to 34 against the US dol­lar amid con­cerns over a global trade war and a faster pace of in­ter­est rate nor­mal­i­sa­tion by the US Fed­eral Re­serve, said se­nior ex­ec­u­tive vice-pres­i­dent Po­ra­nee Thongyen.

In the worst-case sce­nario, if the US im­poses up to US$250 bil­lion (8.25 tril­lion baht) in tar­iffs on Chi­nese im­ports, this would sub­se­quently hit global eco­nomic growth, Mrs Po­ra­nee said.

Set-listed firms’ net profit would also de­crease by 20pc as a re­sult of the US’S pro­tec­tion­ist trade mea­sures, she said.

To re­duce a mas­sive trade deficit with China and ful­fil his cam­paign pledge, US Pres­i­dent Don­ald Trump has vowed to im­pose tar­iffs on $50 bil­lion in Chi­nese goods, rang­ing from dish­wash­ers to air­craft tyres. The first tar­iffs are due to come into ef­fect on July 6.

For­eign fund out­flows from the SET in the first six months, mean­while, were logged at 180 bil­lion baht, com­ing close to the peak of cap­i­tal out­flows in 2012 reg­is­tered at 190 bil­lion, ASP said.

Cap­i­tal out­flows could likely hit a record high as neg­a­tive fac­tors per­sist, Mrs Po­ra­nee said.

For­eign in­vestor hold­ings of lo­cal eq­ui­ties stood at 23.2pc in the first six months. At the end of May, for­eign in­vestors had put 7pc of their money into non-vot­ing de­pos­i­tory re­ceipts (NVDRS), a way for for­eign in­vestors to in­vest in and own Thai stocks. To­tal for­eign share­hold­ing was recorded at 30.2pc, ASP said.

The por­tion of NVDRS has risen by about 1pc year-to-date, im­ply­ing that for­eign in­vestors have shifted their money from long-term hold­ings to short-term ones, as NVDR hold­ers have no say in cor­po­rate de­ci­sion­mak­ing, Mrs Po­ra­nee said.

For­eign in­vestors have been sell­ing lo­cal eq­ui­ties over the past five years and could re­main net sellers this year if the US per­sists in pro­tec­tion­ist mea­sures and fur­ther raises its pol­icy rate, she said.

The global trade war will in­di­rectly pres­sure the baht, with the lo­cal cur­rency ex­pected to weaken to 34 baht to the dol­lar by year-end, Mrs Po­ra­nee said.

The Bank of Thai­land is ex­pected to raise its in­ter­est rate by 25 ba­sis points to mit­i­gate sub­stan­tial fund out­flows in the sec­ond half and pro­vide a cush­ion against ris­ing do­mes­tic in­fla­tion­ary pres­sure, she said.

Set-listed firms’ net prof­its in the sec­ond quar­ter are an­tic­i­pated to ebb from that be­cause of neg­a­tive ex­ter­nal de­vel­op­ments, but the oil and petro­chem­i­cal sec­tors are pro­jected to gain from ris­ing oil prices, she said.

This year’s net profit for Set-listed firms is fore­cast at 1.1 tril­lion baht, up 13pc year-on-year, with earn­ings per share pro­jected at 110.7 baht, ASP said. The SET index is pro­jected at 1,771 points by year-end.

ASP rec­om­mends that in­vestors put 40pc of their money in stocks, fo­cus­ing on the do­mes­tic bank­ing and con­struc­tion sec­tors, which are poised to ben­e­fit from the gov­ern­ment’s in­fra­struc­ture megapro­jects.

De­spite the in­ten­si­fy­ing global trade war and the Fed’s in­ter­est rate hike, these two is­sues are ex­pected to end well, said Mayuree Chowikran, head of re­search at Yuanta Se­cu­ri­ties.

Mar­ket par­tic­i­pants have al­ready ab­sorbed sev­eral rounds of neg­a­tive sen­ti­ment, while there is a pos­si­bil­ity that both the US and China will come to an agree­ment on trade to pre­vent ad­verse ef­fects to the global econ­omy, Ms Mayuree said.

On the do­mes­tic front, Thai­land’s eco­nomic growth tra­jec­tory re­mains strong and do­mes­tic pol­i­tics has sta­bilised, with a gen­eral elec­tion ex­pected to take place in Fe­bru­ary 2019, she said, adding that the baht’s value is likely to ap­pre­ci­ate once trade ten­sions ease.

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