SET index may approach record

Stock investors monitor share prices. SCB Securities says the benchmark SET index has the potential to reach a record high this year. THANARAK KHUNTON

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SCB Securities (SCBS) is bullish about the local stock market, predicting that the benchmark SET index will flirt with its record high of 1,753.73 this year on the strength of massive investment in infrastructure projects, oil price rebounds and Thailand's economic recovery.

The brokerage house forecasts the SET index will reach 1,600 points during the three months to March and hit 1,700 later this year amid a more favourable environment, said senior vice-president Isara Ordeedolchest.

The benchmark index rose to an intraday record high of 1,753.73 points on Jan 4, 1994.

The SET index was one among the best performers last year, rallying almost 20%, and the gain has extended to this year with a 1.9% rise.

"Many countries have turned to fiscal policy to stimulate the economy, and will be more effective that printing money, which was the measure used in past years," Mr Isara said.

Potential oil price rises will help boost prices of other commodities, including farm products, and result in an increase in domestic consumption and price pressure.

"Government spending on infrastructure megaprojects will trigger new private sector investment," Mr Isara said. "It's a good environment for the local stock market as shares are a natural hedging tool against inflation."

Investors are expected to switch their investment to risky assets, including equities in the bonds market.

Pornthep Jubandhu, also a senior vice-president of SCBS, said the SET index at 1,700 points, based on a 12-month forward earnings per share of 115 and 120 baht and price-to-earnings ratio of 14.7, will create a 10-15% return to investors.

Construction, building materials, banks and refiners are investments recommended by the brokerage firm.

Lending growth and asset quality improvement will enhance banks' net interest margin.

"Around two-thirds of Thai banks' lending portfolio are consumer loans (32%), manufacturing loans at 18% and commercial loans at 16%," Mr Pornthep said. "Domestic consumption and export pickups will come as a boon to these types of loans."

In the worst-case scenario, the SET index's resistance at 1,390 points will act as a ceiling.