THAI STOCKS SET may hit 800 by end of next year

Falling rates, crude prices to spur index

Declining oil prices and interest rates will bolster the Thai bourse next year, with a target set of about 800 points by the end of next year, although politics and the global economy are risk factors for the Stock Exchange of Thailand in 2007, say analysts.

However, earnings of listed companies are widely forecast to grow by only a single digit next year, while the economy is expected to grow 4.5 per cent, slightly higher than this year's 4.4 per cent.

The government conducted a road show clarifying its economic policies to foreign investors last Friday.

Asia Plus Securities CEO Kongkiat Opaswongkarn said the new government should be strong enough and have clear policies to maintain investor confidence.

He argued foreign investors would keep their economic forecasts intact and maintain their stock-market investments of Bt110 billion while they gained a clearer picture of the political scene.

He said Thailand's price-to-earnings ratio remained low and that more than half of foreign investors were long-term investors holding shares in large capitalisation companies.

"Foreign investors already realise the risk," he said.

However, Tisco Securities managing director Paiboon Nalinthrangkurn said growth would falter if economic reforms were not continually implemented by the new government.

The investors said the stock index could not be bullish until a permanent administration was formed. The Thai bourse's index will increase when the political picture stabilised, said Paiboon.

Securities Analysts' Association secretary-general Sombat Narawutthichai said the political factor could cause the index to fluctuate about 20 points next year, but he believes the capital will eventually flow into the market as long as the index is not too high.

"The political situation improved after the coup, despite some arguments, but it will be better when new politicians come into office," he said.

In addition, Kongkiat said the US current-account deficit remained a concern threatening the world economy.

The unsolved problem has caused the US dollar's depreciation this year, pushing the relative value of the baht up 10 per cent this year.

Paiboon said the world economy would play a key role in the stock market next year, with the US expecting a soft landing with 2-3 per cent growth amid concern about whether Japan's economy will recover rapidly enough to compensate for the US slowdown.

However, he expects foreign capital to continue to flow into Asian markets, including Thailand, pushing the index up to 800 points next year.

Asian stock markets, including Indonesia, Singapore and Hong Kong, reached all-time highs after enjoying huge capital inflows this year.

"As long as the earning are low, the stock index could grow only in the short term. Although capital will flow in, it will go out, due to the low earnings," he said.

From : The Nation
By : PLA
Date : Nov 14, 2006

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