Bulls start eyeing one of the world’s top equity rallies

A customer checks market movements on a computer as an electronic board displays stock prices at the Asia Plus Securities Pcl headquarters in Bangkok, Thailand. (Bloomberg pic)

BANGKOK: Thailand’s stock market is one of the world’s best performers this quarter and may climb further on surprisingly strong economic growth, according to a US$44 billion fund manager.

A report Monday showed gross domestic product expanded 4.6%, more than many economists expected, signalling that investment and consumption will spur earnings growth, said Narongsak Plodmechai, chief executive officer of SCB Asset Management Co. in Bangkok.

“Strong economic growth should help Thai equities fend off higher volatility in global financial markets as trade tensions linger,” Narongsak said in an interview Tuesday. The benchmark SET Index may reach at least 1,800 this year, he said. That’s about 6% higher than Tuesday’s close.

The index has climbed 7.4% this quarter in dollar terms, behind only Mexico among benchmark stock indexes tracked by Bloomberg. SCB Asset Management, Thailand’s biggest private money manager, joins Morgan Stanley in turning more bullish on the Thai market, where international funds have withdrawn more money than they’ve invested each month for almost a year.

Banks, property developers and auto-part makers will be the main beneficiaries of the Thai economic recovery, Narongsak said.

Morgan Stanley rated Thai stocks as among its top defensive picks in Southeast Asia amid a wider emerging market rout, strategist Sean Gardiner said in a Bloomberg television interview Aug 16.

Overseas investors have withdrawn a net US$78 million from domestic equities so far in August, headed for the 11th month of outflows, according to data tracked by Bloomberg. Thai stocks are rebounding from a 10% slide from April through June, their worst quarter in three years.

But there are still risks to negotiate, including a potential rise in Thailand’s benchmark interest rate that could pose a headwind for some companies. Economic expansion and higher energy prices may fan domestic inflation, according to Narongsak.

Bank of Thailand Governor Veerathai Santiprabhob struck a hawkish tone Monday after the growth report, saying officials are waiting for the right time to consider what would be the first interest-rate hike since 2011.