Aberdeen points out keys to rally

Aberdeen points out keys to rally

Whether the Thai stock market manages to maintain its current rally depends on infrastructure investment, energy sector reform and subsidies, tax reform and rice management policy, says Aberdeen Asset Management.

"These four factors need time, at least a year. An election being held soon might be good in theory but not in practice," chief investment officer Adithep Vanabriksha said yesterday.

He said the market was keeping an eye on developments in these four issues, not a new general election.

The local stock market is running beyond its fundamentals in response to the May 22 coup. Its price-to-earnings ratio of 13-14 times is cheaper than the Indonesia, Philippines and India bourses, but more expensive than Taiwan, Singapore, South Korea, China and Hong Kong.

"Market prices have advanced 20% year-to-date, but that's neither expensive nor cheap and still attractive for medium- and long-term investment. But investors must selectively buy," said Mr Adithep.

Aberdeen estimates earnings growth of companies under its management portfolio at 7-10% and dividend yields above 3%. The company recommends a diversified portfolio due to an expected rate hike and possible bubble.

"Global investors have seen a low interest rate for about six years, aggravated by money pumping fiscal plans, so there is a risk a bubble may occur, or we may already be in a bubble," Mr Adithep said.

He singled out Asian emerging markets including China — whose share prices are not too high — and the local equity market as interesting areas for investment.

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