KS: Equities primed to rise
Equity investment in the banking sector is poised to gain traction on higher loan demand from Thailand’s continuing economic recovery and lower loan delinquency, says Kasikorn Securities (KS).
Thailand’s economic recovery is anticipated to lift investment and consumption, propelling greater demand for loans, particularly large corporate loans that have low default risk, said KS vice-president Prakit Sirivattanaket.
Bank loan growth is projected to expand by 6% this year, up from 4.4% registered in 2017, while gross non-performing loans are expected to dip to 3.64% from 3.73% last year, Mr Prakit said.
Bank equities will benefit from this outlook, with net profit in the banking sector expected to rise by 11% this year, he said.
Banks’ forward price-per-book value is expected to rise to 1.6 times from a 10-year average of 1.35.
“Banks can reverse the loan-loss provision to earn a net profit [this year],” Mr Prakit said. “Large banks that are expected to benefit the most are Bangkok Bank, Krungthai Bank and Tisco Financial Group.”
Other retail businesses expecting to benefit from rising inflation are CP All Plc, Home Product Center Plc and Robinson Plc, he said.
Despite the previous plunge in the US stock market over concerns of rapid rate hikes and rising inflationary pressures, these factors are seen as short-term fluctuations, Mr Prakit said, as the 10-year US bond yield is still close to the US inflation rate, which has remained low for more than a decade.
Despite projections of volatile fund flows, the effect on Thailand’s stock market will be limited, he said, because foreign investors have few Thai stocks in their portfolios at the moment.
The Stock Exchange of Thailand (SET) index, meanwhile, is expected to reach 1,820-1,840 next month, supported by good market sentiment attracting foreign fund inflows and enticing investment demand in equities where listed companies earn their revenue from domestic business operations, Mr Prakit said.
“The current period is the time to buy stocks before the bourse posts an ex-dividend sign in the middle of March to April,” he said. “KS forecasts that the SET index will reach 1,850 points this year, but if Thailand’s general election goes smoothly, then the market will have more confidence and more capital inflows.”
The market understands that the general election will be delayed to early 2019, Mr Prakit said.
A point of concern, he said, is the market capitalisation of large-cap stocks in the US, which nearly reached 200% of the country’s GDP — a level that preceded both the dotcom crisis and the 2008 economic crisis.