UBS Securities (Thailand) forecasts the Stock Exchange of Thailand will reach 1,500 points next year, mainly driven by local investors.
Thailand is one of the best stock markets in the world given its economic strengths and reasonable prices, says analyst Raymond Maguire. TAWATCHAI KEMGUMNERD
The bull market would be largely supported by domestic investors, which account for 80% of the market.
A projection of 5.5% for economic growth next year would increase local wealth and encourage stock investment, said Raymond Maguire, head of research and strategy.
Strong loan growth, largely from retail finance and small enterprises, has supported the country's consumption as well. The credit cycle is expected to remain accommodative over the next couple years.
Although household debt has increased to 47% from 20% in the past few years and is heading for 60% over the next two to three years, the central bank is closely monitoring the situation.
The firm believes the Bank of Thailand may cut its policy rate by another 100 basis points throughout next year to keep economic momentum in the face of the global downturn.
In addition, government spending on infrastructure projects will support the country's economic growth.
"Thailand is one of the best stock markets in the world given its economic strengths and reasonable prices," he said.
In 2013, revenue of companies listed on the SET is expected to increase 8% year-on-year, while earnings per share and return on equity are projected to rise 18% and 25%, respectively.
UBS is optimistic about three sectors _ property, transport and telecommunications _ driven by infrastructure projects and 3G-related investments.
However, the company has a negative view on consumer discretionary stocks because of limited revenue and profit margin growth.
It has a neutral view for two key industries, energy and banking. Energy underperformed the main index by 13% year-to-date and is expected to show low growth.
Solid loan growth in the banking sector would lead to a higher risk profile as interest rates drop next year, he added.