Despite sporadic financial volatility in the domestic stock market, Thailand`s bourse is projected to reach a new high this year given the general election stays on schedule for next year and the ongoing trade dispute does not escalate into a trade war, says Kasikorn Securities (KS).

The Stock Exchange of Thailand (SET) index is projected at 1,898 points this year-end, assuming the bourse`s price-to-earnings (P/E) ratio stands at 14.9 times, earnings per share growth is 10.4%, Thailand`s general election remains on schedule for 2019, emerging markets` economic growth continues, and the trade war does not materialise, said KS.

The brokerage increased its GDP growth outlook for Thailand to 4.5% from 4%, predicting 4.2% for 2019.

Prakit Sirivattanaket, vice-president of KS, said there are signs of income and purchasing power picking up in both the farm and non-farm sectors.

"The expectation of a general election should also help fuel the government`s financial injection to the low-income segment," said Mr Prakit.

"For the high-income segment, we have started to see signs that banks and financial institutions are approving more loans. KS expects to see consumer purchasing power strengthen in the second half, supporting economic growth."

He expects the general election time table will be known by November, with the earliest date in February and the latest likely to be in May.

There could be capital inflows in the second half as stock valuation in regional markets, especially Thailand and Singapore, is quite cheap, said Mr Prakit.

"Foreign investors could return after outflows of US$7 trillion from emerging countries to prepare for the trade dispute, which lowered the P/E ratio in Thailand`s capital market to 14 times," he said.

The worst-case scenario sees the SET index closing at 1,423 points by year-end if the general election continues to be delayed, GDP growth in emerging economies slows, and a full-scale trade war erupts, said Mr Prakit.

A global trade war is the biggest risk to the Thai bourse, potentially lashing the index by 341 points, he said.

Kampon Adireksombat, senior vice-president at KS`s research department, said the current scenario only qualifies as a trade dispute, limited to the US and its major trading partners.

"We have factored in import tariffs as an uncertainty pressuring market sentiment, though these are difficult to price in," he said.

By Bangkok Post(Published: 19/07/2018)

https://www.bangkokpost.com/business/news/1505786/ks-optimistic-on-bourse-rebound-in-second-half

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