Thailand's stock market continues to offer attractive valuations, with gains of more than 20% amid difficult global economic conditions, says Finance Minister Kittiratt Na-Ranong.
Mr Kittiratt noted annual dividends paid by listed companies to shareholders totalled more than 200 billion baht the past two years despite global economic weakness. PATTANAPONG HIRUNARD
"The Thai capital market over the past three years has been very strong and stable, with average returns of 22% per year," he said at the opening of the SET in the City investment fair yesterday.
"Even with the floods [in late 2011], returns over the first nine months of the year were over 26%."
The Stock Exchange of Thailand index yesterday closed at 1,279.51 points, up 3.12, in trade worth 40.8 billion baht. For the year to date, the index is up nearly 25%, ranking as one of the best performances in the region.
Mr Kittiratt, who served as president of the SET for five years until 2006, said another sign of the fundamental strength of the market was the fact that dividends paid by listed companies to shareholders totalled more than 200 billion baht per year over the past two years, despite the weakness in the US and European economies.
He said Yingluck Shinawatra's government is intent on maintaining its pledge to consolidate the budget deficit, pointing to a projected deficit of 300 billion baht or 2.4% of gross domestic product in the 2013 fiscal budget.
This compares with a deficit of 400 billion baht or 3.5% of GDP last year. The Finance Ministry has announced a goal of reducing the deficit by 20% per year, with a balanced budget position reached by 2017.
"We are intent on bringing the deficit down to below 2% of GDP, a position that has to be considered very strong," Mr Kittiratt said.
He expects little impact on the Thai economy if US policy makers are unable to reach a budget compromise and mandated spending cuts and tax hikes take effect next year, a scenario dubbed as the "fiscal cliff".
The economy, in any case, is undergoing a transformation in which its long reliance on external markets and exports for growth is shifting to domestic demand and investment.
"The Thai economy is very solid and stable, whether one considers exchange rates, interest rates, economic growth or unemployment," said Mr Kittiratt.
The Fiscal Policy Office projects economic growth this year of 5.5% and 5.2% next year.
Analysts expect market prospects to continue to remain positive.
Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Associations, said Asian markets excluding Japan are likely to remain the most attractive investment destinations for the next two years.
The SET, based on forward valuations, has a price-to-earnings ratio of 11 times, slightly higher than the regional average of 10 but lower than the 13 times valuations of Malaysia, Singapore and Indonesia.
"2013 will be a difficult year for investors, though, as the Thai market has risen continuously for the past four or five years," said Mr Paiboon.
"Investors must be selective in buying. Energy and banks now lag, but should benefit once the global economy recovers."
Kongkiat Opaswongkarn, the chief executive of Asia Plus Securities, suggested investors diversify their holdings to foreign markets to help boost returns.Chinese stocks should gain next year, while property prices in London, Europe and the US could also recover.
Mr Kongkiat said Asia Plus may launch its first property fund focused on foreign assets, with potential annual returns of more than 7%.
One of the country's largest funds, the Government Pension Fund, is also shifting weight more towards equity and property.
"Interest rates are still on a downtrend, at 2.75% against inflation of 3% to 3.5%, so the returns are still negative on bonds," said the fund's secretary-general Sopawadee Lertmanaschai.
Gold could also benefit as an asset class if the US dollar and other currencies weaken.
Tipa Nawawattanasup, chief executive of YLG Bullion and Futures, said gold prices could reach US$1,800 per ounce by the end of the year and trade within $1,500 to $1,800 next year.
SET president Charamporn Jotikasthira said local companies raised 250 billion baht in funds from the capital market this year, of which 113 billion was from initial public offerings.
Nine companies are expected to list before the end of the year, he said, while 2013 will see the debut of the first infrastructure holding company, CK Power.