As SET nears 24-year high, bubble not feared
Risks seen as unlikely with low P/E ratio
The Stock Exchange of Thailand (SET) index yesterday continued its rally, reaching the highest level in nearly 24 years, but such brisk equity trading was not deemed a financial bubble as the index’s price-toearnings (P/E) ratio remains low.
The Thai bourse closed at 1,670.2 points, up 0.6%, in heavy turnover worth 67.8 billion baht. The SET climbed to 1,678.23 points at one point yesterday, considered the highest in almost 24 years.
The last time the SET index reached an all-time high was January 1994, where the bourse rose to 1,753.73 points.
The bourse tumbled significantly during the 1997-98 Asian financial crisis, falling to 214.53 points in August 1998.
Foreign investors were the highest net buyers at 1.98 billion baht, followed by institutional investors at 1.18 billion and brokerage firms at 533 million, while retail investors sold 3.7 billion baht worth.
Heavy turnover seen in the Thai bourse was in line with the upward trend of regional stock markets, with the Philippine Stock Exchange index hitting a record high of 8,291.14 points, up 1.38%.
The SET’s stock rally was led by purchases of large-cap equities in the energy, telecom, consumer goods, and construction sectors such as PTT (+1%), PTTEP (+1.4%), SCC (+1.6%), and TRUE (+5%).
Despite the SET index climbing sharply over the past three weeks, the bourse is not overheating and there is no sign of a financial bubble forming in the stock market, said Paiboon Nalinthrangkurn, president of the Investment Analysts Association and chief executive at Tisco Securities.
Foreign funds have shifted from stock markets in Indonesia and Vietnam to Thai stocks due to the Indonesian and Vietnamese stock markets rising about 15-20% earlier, bringing investors to seek new opportunities in the SET, which is considered a laggard market with buoyant economic growth outlook, Mr Paiboon said.
High financial liquidity in the global financial markets and the low interest rate environment worldwide are also factors prompting foreign fund flows to channel into the Thai bourse, he said.
“The SET index rose about 1-2% during the first eight months of this year and has risen around 5% this month,” he said. “No financial bubble is forming in the SET despite some concerns as the index has risen sharply for merely one month, while the [P/E] ratio of the SET is about 16-17 times, considerably lower than regional peers.”
A consensus of analysts forecasts that the SET earnings per share this year will reach 5-6% before jumping to 10% in 2018, while market P/E ratio is projected to reduce slightly to 15-16 times next year. If the SET’s performance in the fourth quarter beats expectations, this will lend support to uplift market confidence.
SET president Kesara Manchusree said the bourse’s turnover relative to total market capitalisation is 60%, lower than historical statistics recorded at 90-100%.
The SET has not experienced much volatility this year, therefore daily trading by retail investors has declined to below 50%, she said.
Foreign investors remain net buyers in Thailand’s stock market, with year-todate net inflows totalling 14 billion baht, with net inflows worth 11 billion logged in September.
“Yesterday’s turnover remained lower than market average, so there is no concern about the market being overheated,” Mrs Kesara said.
“We have revised up our 2018 index target to 1,900 points. We believe largecap stocks will lead the market,” said Jitra Amorntham, chief analyst at Finansia Syrus Securities.