The Thai stock market`s bull run is expected to continue for at least a couple of years, though the bourse`s rally has lasted for a decade, says Tisco Securities.

The optimistic view is supported by the growing earnings of listed companies, said Paiboon Nalinthrangkurn, chief executive of the brokerage.

"The Thai market`s strength is it can break new records without support from offshore funds," he said.

Foreign investor holdings in Thai shares tallies 3.2 trillion baht, down from recent years as most new offshore fund flows are to the bond market, said Mr Paiboon. Foreign investors` selling spree in Thai shares has continued for three straight years.

In 2017, the Stock Exchange of Thailand (SET) index recorded an annual gain of 13.7%, while foreign investors cashed out 25.8 billion baht. Institutional investors were net buyers of 104 billion baht in 2017, versus net sales of 8.7 billion in 2016, while brokers continued their buying spree at 16.7 billion, albeit at a slower pace from 25.4 billion in 2016.

The benchmark index extended the record-breaking streak in January before falling to below the 1,800-psychological mark this month.

Thai shares bounced back to close at 1,800.03 yesterday.

Investors have unloaded Thai equities as prices of the 20 biggest market-cap shares on the SET have soared, while global stock markets have grown and new economy stocks are on foreign investors` radar, he said.

"The Thai bourse is the only market that foreign investors are shunning, with their holding value declining to 30%, below the level seen during the US financial crisis," said Mr Paiboon.

There is excessive liquidity in the global economy, reflected by the asset size of global funds, which has reached €60 trillion, up from €23 trillion before the crisis, and global interest rates are relatively low despite the economic uptick, he said.

"The improving global economy is unable to absorb the surplus liquidity. Even in instances where the recovery is so strong it is attracting real sector investment, it cannot dry up the liquidity," said Mr Paiboon.

Despite the subdued inflation, he remains concerned that inflation down the line could spike interest rates.

"A surge in the 10-year US government bond yield curve, which reflects the long-term interest rate trend, is worrisome. It could take a heavy toll on the stock market if the yield curve hits 3.5% -- the level which Deutsche Bank estimates will cripple economic growth," said Mr Paiboon.

The 10-year government bond yield is 2.8%.

He rushed to allay fears, noting the view of economists who say the long-term interest rate will not hit the 3.5%-threshold this year, and may only be seen next year at the earliest.

Another risk is the wild swing in global stock markets, stemming from algorithmic trading.

Mr Paiboon said the rising use of high-frequency trading and more passive funds have contributed to the hike in average daily trading volume in US markets over the past several years.

By Bangkok Post(Published: 14/02/2018)

https://www.bangkokpost.com/business/finance/1411794/set-bull-run-expected-to-maintain-clip

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