Brokerage revises down SET forecast

CLSA Securities (Thailand) has cut next year’s SET index target to between 1,500 and 1,550 points from 1,600 on expectations the economy will recover slowly on the back of the US Federal Reserve’s rate rise.

The Fed’s 25-basis-point rate increase on Thursday has hit Asian currencies and pushed foreign fund outflows to the US in pursuit of higher yields.

Prinn Panitchpakdi, CLSA’s country head, said the most worrying concern for 2016 was China’s economic slowdown, with the company expecting a 5% depreciation in the yuan for every onep-ercentage-point rise in the Fed’s policy interest rate.

“If the Chinese economy slows more than expected, the depreciation could be as high as 15% from now,” Mr Prinn said.

The Fed’s interest rate increase will continue to affect emerging markets including Thailand, with huge capital outflows possible.

The market expects the baht will decline to 37-38 to the US dollar next year, but CLSA thinks it could drop to 39, Mr Prinn said. And if the yuan does spiral down by 15%, the baht could even pass 40 to the dollar.

He said Thai listed firms performed worse this year, with the baht depreciating 8%.

“Looking at all the supporting factors, we don’t think the Thai market will reach 1,600 points in 2016,” Mr Prinn said.

He said the Chinese government was trying to maintain economic growth at no less than 6.5% by continuing stimulus measures to spur consumption next year in a bid to keep the pace of yuan depreciation at 3-5%.

Voravan Tarapoom, chairwoman of the Federation of Thai Capital Market Organizations (Fetco), said the risk factor for Thai corporations next year was the rising amount of dollar debt, in line with the weaker baht.

Thus, currency risk management will be crucial for Thai businesses next year, she said.

Fetco also revealed the investment confident i ndex f or t he next t hree months (to February) stood at 89.42 points, a 10.8% decline from last month’s reading of 100.2.