Further inflows set to buoy local stocks
Fund flows are expected to continue into Thai-listed stocks for the rest of the year as investor confidence feeds off greater domestic political stability and the militaryled government’s opposition weakens, says an asset management firm.
Capital inflows into the Thai bourse are expected to reach 30-40 billion baht in the third and fourth quarters, with heavy fund flows expected to occur again when the general election date is scheduled, said Wajana Wongsupasawat, director of UOB Asset Management Thailand (UOBAM).
“After the third quarter ends, we expect an upward revision by the market in terms of SETlisted companies’ performance during this year’s second half,” Mr Wajana said, noting that sectors which have decent growth potential for the rest of the year include tourism and hotels.
The SET index is projected to remain in an upward trend, with UOBAM maintaining its target for the benchmark of 1,650 points for this year and 1,700 in 2018, he said.
“Although the SET index is projected to have a narrow correction at 1,590 points this quarter, the bourse is anticipated to rally to 1,650 points in the last quarter,” Mr Wajana said.
The Thai bourse is one of the laggard stock markets among emerging economies in Asia because there is a narrow return on investment — lower than 5% — compared with double-digit returns in other emerging markets, he said.
“Thai investors should not rush into selling their stocks, as the SET index is expected to have a potential upside gain,” Mr Wajana said. “They should take this opportunity to purchase large-cap stocks or index funds.”
Kongkiat Opaswongkarn, chairman of Asia Plus Holding Plc, said tensions in the Korean Peninsula that occurred earlier this week generated the most concern for foreign investors, prompting investment funds to divert from Northeast Asia and shift towards Thailand’s stock market because the Thai bourse is identified as a laggard among Asia’s emerging markets.
Some investment funds have also shifted towards gold, a safe-haven asset class, to hedge against rising geopolitical risks, Mr Kongkiat said.
Stock markets in South Asia have yet to attract substantial capital inflows because of expensive stock prices, with year-to-date return on investment increasing to around 20%, he said.
Sources of capital inflows coming into Thailand in the future could derive from Europe and the US, given that the US Federal Reserve paused its cycle of interest rate hikes and the European Central Bank has halted its monetary stimulus programme, Mr Kongkiat said.