ASP predicts SET to reach 1,620 points

Asia Plus Securities (ASP) forecasts the SET index will reach 1,620 points this year on the back of a more stable domestic political environment after the royal endorsement of the new constitution was announced last Thursday and massive state investment.

The new charter will help improve political sentiment and build up the confidence of investors as it allows them to estimate a timeline for the general election, said executive vice president Therdsak Thaveeteeratham.

The government’s investment in bigticket infrastructure projects, which will boost private investment, domestic consumption and the stock market, is expected to be ramped up in the second half, he said.

The brokerage house predicts that the country’s GDP will rise 3.5% this year, up from 3.2% last year, underpinned by growth in export value, the tourism sector and government spending.

The 1,620-point forecast is based on assumptions of earnings per share (EPS) growth at 7.13% to 991 billion baht this year and the market’s price-to-earnings (PE) ratio of 16 times.

Listed companies’ aggregate net profit for the first three months is estimated to be similar to the 226 billion baht generated during the same period last year.

The banking sector is expected to perform the best among its peers in the stock market during the first quarter with a combined net profit of 54 billion baht, followed by the energy sector at 50 billion.

“The Thai stock market’s current PE of 15.2%, with EPS growth of 7.13%, makes the local bourse less attractive than the US, whose EPS is higher than 10%, so investors must adopt a selective play strategy,” he said.

The SET index has risen 2.5% this year, hitting 1,582.12 points yesterday.

Foreign investors have bought a net of 8 billion baht year-to-date on the SET.

The Thai stock market could be under pressure from capital flight in the second quarter amid the prospects of the US interest rate hike, said Mr Therdsak.

Looking back over the past decade, the data also shows that foreign investors have yanked money out of the Thai stock market in the April-to-June quarter for seven out of the last 10 years, he said.

The broker recommends that investors scoop up stocks with a low debt-to-equity ratio and focus on sectors benefiting from the upward interest rate trend and those related to domestic consumption.