Sentiment about the Thai stock market is improving as investors shift to equities from bonds in search of higher yields and monetary easing in large economies boosts liquidity, says the Federation of Thai Capital Market Organizations (Fetco).
Fetco chairwoman Vorawan Tarapoom and key economists speak to the media at a briefing on the February investor sentiment index. WISIT THAMNGERN
"We believe that Thailand's capital market remains neutral with a solid signal of shooting up to nearly a bullish level driven by external factors," chairwoman Vorawan Tarapoom said yesterday.
According to the Fetco-Nida investor sentiment index for February, confidence among four types of investors about the next three months stands at 115.59 points, up nearly 31% from the previous survey.
Foreign investor confidence returned to neutral at a level of 116.67 points, up from a bearish view of 66.67 just a month ago.
Brokers showed a bullish view at 140 points, up from 120 a month ago.
Retail investor confidence improved to 113.86 points from 98.04, while local institutional investors registered 108.33 points, up from 75.
The earnings gap between equity dividend yields and one-year bond yields is as high as 4.2%, said Padermpob Songkroh, managing director of Kasikorn Securities.
"The situation is different from a few years ago when the US central bank imposed its second and third round of quantitative easing," he said. "At that time, the yield in bonds was higher than for equities."
He said the first quarter would probably see shares driven by the European Central Bank's monetary policy.
"The additional liquidity is likely to boost the global market price-to-earnings (P/E) ratio," Mr Padermpob said. "The market P/E can go to even 15 or 16, no matter that the price is too expensive or not."
With a P/E of 15 or 16, the Stock Exchange of Thailand index would stand at 1,550 or 1,655 points.
He anticipates the index breaking 1,700 if quantitative easing revives production in Europe and the large economies.
Retail investors, brokers and foreign investors see the property and construction sector as the strongest over the next three months, while local institutional investors like the technology sector.
Resources is the sector that retail investors, local institutional investors and foreign investors view as the least attractive, while brokers are shunning the service sector.
Jeremy Whitley, head of British and European equities at Aberdeen Asset Management, said investors in European bourses were oversold due to the lingering crisis in the euro zone.
"Many European companies are operating globally and their earnings come from businesses outside Europe," he said.