Fund managers dismissed notions of a stock market bubble as the Stock Exchange of Thailand (SET) rallied 3.04% yesterday on a technical rebound after last week's 7.46% plunge.
The benchmark SET Index surged at the opening bell and moved in positive territory throughout the session to close at 1,523.95, up 44.98 points, with active trading worth 58.35 billion baht.
Last week's selling spree was triggered by a slew of concerns over potential harsh measures to be launched by the central bank to curb the baht's 16-year high. Traders were also worried by the SET's plan to raise the cash account collateral value, and uncertainties over Cyprus's debt crisis. The 7.46% market fall was the biggest weekly drop since October 2008.
Phillip Securities assistant vice-president Teerada Chanyingyong said the market could move sideways for a while after yesterday's strong gains as investors may stay on the sidelines to digest the baht situation. "Concerns will haunt the stock market again if the baht tends to appreciate sharply."
A strategist at KGI Securities, Adisak Kammool, said the market rebound could come to an end if the SET failed to close firmly above 1,515 today.
Fund managers still recommend investments in equities, and agreed that the local bourse does not show any signs of a bubble yet.
Fund managers from Krungsri Asset Management, Bualuang Asset Management and MFC Asset Management Plc (MFC) said buying volumes in tax-saving mutual funds including long-term equity funds (LTFs) and retirement mutual funds (RMFs) rose significantly last week when the SET plunged sharply.
"Bubbles may be detected in small-cap and speculative stocks, but not the overall stock market as it is still the third cheapest among Asian bourses," Prapas Tonpibulsak, chief investment officer at Krungsri Asset Management, said.
Pannaran Bhanpato, first executive vice-president at MFC said Thailand's economic fundamentals remain sound with a solid growth outlook to be driven by government investment. Listed companies are expected to enjoy double-digit growth over the next five years. In addition, Thai investors are well informed and could tolerate higher risks, she said.
"The global investment theme is allocating money to risky assets for higher returns. The SET Index has 12% upside. Investors may be able to beat the market if they pick quality stocks with PE [price-earnings] ratios below 10 times, more than 4% yields with earning growth support," Ms Pannaran said.
She recommends equity investments in Asean Economic Community, infrastructure and urbanisation plays.