The Thai share market jumped 2% yesterday as investors cheered recent signals from the US Federal Reserve indicating its asset-purchasing programme will be maintained until the economy improves.
The Stock Exchange of Thailand closed at 1,487.19 points in heavy trading worth 57.17 billion baht.
The index continued its upward trend for the week, said Sukit Udomsirikul, managing director at Maybank Kim Eng Securities (Thailand) (MBKET).
The market had been in a rut in previous weeks as sentiment expected the US might cut its quantitative easing, which has fuelled demand in emerging markets. However, Fed chairman Ben Bernanke alleviated some worries as he suggested the stimulus would not likely be curbed until the outlook is better.
"Some investment funds returned to the markets to buy cheap stocks that were undervalued for a while," said Mr Sukit.
He added investors should watch the US economy closely to see if takes longer to recover.
"The market will definitely continue to fluctuate in response to negative signs from the US and Europe, so investors should beware," said Mr Sukit.
For the short term, emerging markets are likely to grow as foreign investors are keen on cheap asset prices with good potential earnings growth.
The SET reported foreign investors were net buyers of 820 million baht yesterday, followed by institutional traders at 172 million baht and proprietary traders 161 million, while retail traders were net sellers of 1.15 billion baht.
He said MBKET maintains its SET target of 1,550 points this year because it reflects the market's fair value. But he added the firm will revise the earnings projections of listed companies to account for the slowdown in China.
The sectors that are likely to be affected by slowing Chinese consumption are petrochemicals and automobiles. The property sector will delay construction due to labour shortages, while the banking sector may have to deal with higher non-performing loans (NPLs). However, the telecom sector is still promising, he said.
Earlier MBKET projected listed company net profit this year will grow 25% and earnings per share will grow 20%.
Wilasinee Boonmasongthrong, an analyst at Globlex Securities, said the banking sector outlook remains positive as its net-interest margin remain promising while NPLs are being strictly controlled and lending and fee income are still growing.