The Stock Exchange of Thailand (SET) index is expected to trade in a range of 1,680 to 1,730 points this month, with a possible upside coming from target price upgrades following an announcement of third-quarter earnings, says Tisco Securities.
"The SET has already surpassed our 2017 target of 1,680 points and is now trading at a demanding price-to-earnings ratio of 16 times for 2018," said Monchai Mokaranuraksa, head of research for Tisco Securities.
"However, the SET upgrade may not happen until early November as few companies will announce their earnings in October," he said.
The Thai bourse hit a new peak for the year at 1,729.80 points last Tuesday before profit-taking forced it to dip below 1,700 points last Thursday.
Investor sentiment was damaged by the Securities and Exchange Commission's filing of criminal charges against the chief executive of Group Lease Plc (GL).
GL shares were temporarily suspended on Monday and when trading resumed the share price fell by more than half.
"However, we believe the main reason for the rapid SET correction was how investors embarked on a profit-taking strategy after a strong rally, which began in late August," said Mr Monchai.
"In the short term, we recommend investors adopt a trading strategy and accumulate stocks on dips and take profit when the SET rises. Below 1,700 points will be the accumulation point."
The third-quarter earnings season has already begun, with a handful of banks announcing their earnings. Bank results so far have not been that impressive, but this is in line with market expectations, he said.
For both financial and non-financial companies, the market consensus expects robust results, with year-on-year growth above 20% and quarter-on-quarter growth of more than 10%.
This could support further upgrades of earnings and target prices for many companies, said Mr Monchai, helping increase the SET index later this year.
Leading economic indicators are very positive in the third quarter, with data suggesting an improvement in overall conditions.
Exports are on a growth trend, up more than 12% year-on-year for September. Domestic car sales surged by 21.9% year-on-year in September, another improvement in domestic economic conditions this year.
"We expect trading activities to be subdued for the week with the focus on the royal cremation ceremony," said Mr Monchai.