SET back to life, hitting 18-year high

Inflows, regional trend help lift prices

Thai stocks surged, driving the benchmark index to its highest level since November 1994, as data showed domestic investors bought equities for a fourth day.

The SET Index climbed 1.7% to 1,514.11 at the close. PTT rose 4%, the most since November 2011, as crude oil traded near a one-week high. Bangkok Bank (BBL) jumped 3.4%, the biggest increase since Jan 28.

Institutional investors, brokers and foreign investors were net buyers of 1.52 billion, 992.75 million and 823.73 million baht respectively yesterday while retail investors were net sellers of 3.33 billion baht.

Sentiment was boosted yesterday by gains in regional markets as Singapore and Malaysia resumed trading after Lunar New Year holidays, BBL Asset Management's Voravan Tarapoom said.

"Investors continue to show optimism," said Ms Voravan, chief executive officer at BBL Asset. "There is also a significant inflow of money into equity funds from domestic investors."

Some 72 billion baht of shares traded on the Thai bourse yesterday, the highest turnover since Jan 10 and 64% more than the three-month daily average.

The SET Index has gained 8.8% this year, extending a 36% rally in 2012, as domestic investment and consumption recovered from floods in 2011 that were the worst in almost seven decades. The government has increased minimum wages and offered tax incentives for automobile purchases to boost growth.

The SET index is projected to reach 1,700 points this year on the back of higher-than-expected fund inflows, public investment and projected earnings growth of listed firms of at least 15-20%.

Paiboon Nalinthrangkurn, CEO at Tisco Securities, and Kavee Chukitkasem, an assistant managing director at Kasikorn Securities, believe the SET index will reach 1,700 points if foreign funds continue to flow into emerging markets including Thailand.

The government's planned investment of 2.2 trillion baht in megaprojects is also a major factor driving the index.

"So far, there are no factors to force foreign funds to go outside Asia, as the continent is growing well. Thailand also has good prospects with the single economic market through the Asean Economic Community," said Mr Paiboon.

Mr Kavee said it seems likely that interest rates will remain low and that the investment projects will directly benefit the construction sector.

"The SET index at 1,700 points may be seen this year, but for next year it is definite," said Mr Kavee.

Chakkrit Charoenmathachai, managing director at Globlex Securities, expects the market to reach 1,550 points in the first half of this year and rise to 1,700 in the second half, helped by floods of global liquidity as central banks use monetary policies to boost economic growth.

He said the economic problems of the US and the euro zone had bottomed out, so the downside risk was limited.

Sectors that will benefit from government spending are building materials, construction, banking, property and communication.

Anuwat Ruamsuke, assistant managing director at Phatra Securities, said it will revise its SET index target this year from 1,550 to 1,700 points if the cabinet approves borrowing for infrastructure projects worth 2 trillion baht.

Phatra also projects listed earnings growth of 12-15% this year.

Mr Anuwat said property companies will benefit most from government projects, especially the skytrain extension, while energy prices will increase in line with the rise in global demand.

However, as the Thai share market had increased for two years, it will be highly volatile because of profit taking, he warned.

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Writer: Nuntawun Polkuamdee & Bloomberg