Thai institutional investors are picking up stocks at a record pace as an exodus of foreign money sends valuations to a nine-month low.
Domestic funds bought a net 28.6 billion baht worth of Thai stocks this month through Friday, on course for the biggest monthly inflow since Bloomberg began compiling exchange data in 1999. Foreigners have sold a net 55.4 billion baht worth of shares this month, heading for a record outflow.
The SET Index has dropped almost 12% since US federal Reserve Chairman Ben Bernanke said on May 22 that policymakers may consider paring stimulus if the US labour market improves, prompting investors to wipe as much as $5.3 trillion in value from global stocks.
The slump drove the SET's valuation down to 11.8 times projected 12-month earnings on June 24, the cheapest since Sept 5 last year.
The SET closed on Friday at 1,451.90 points, an increase of 3.6% from the previous Friday's close of 1,400.50, ending five consecutive weeks of declines.
"With the current valuation and corporate earnings outlook, equity investment may offer spectacular returns," said Saharat Chudsuwan, senior vice-president of Tisco Asset Management Ltd.
"This is a great opportunity because the fund outflow hasn't changed the fundamentals of the Thai economy and companies."
Earnings of companies in the SET Index may climb 32% over the next 12 months, according to data compiled by Bloomberg. That's double the 16% growth forecast for companies in the MSCI Emerging Markets Index.
Mr Saharat recommended shares of banks, retailers and building materials producers whose revenue will benefit from domestic consumption growth. He declined to specify which stocks his funds bought or sold.
The Tisco High-Dividend Equity Fund has jumped 20% this year, the best performer among 200 stock funds domiciled in Thailand, according to data compiled by Bloomberg.
Tisco earlier this month raised about 500 million baht offering two new equity funds. Tisco Asset has offered about 1 billion baht in new funds since June 20, according to a company statement on June 19.
BBL Asset Management Ltd (BBLAM), a unit of Bangkok Bank, plans to raise as much as 2.56 billion baht from a new equity fund offering between June 24 and July 2, according to a June 20 statement. The company was ranked as one of Thailand’s two top equity fund managers this year by Morningstar Inc, a fund researcher.
Purchases by domestic institutional investors will help bolster local shares, Vorapol Socatiyanurak, secretary-general of the Securities and Exchange Commission, said on June 21.
Foreign outflows may delay any stock rebound, according to Chakrit Puechpan, head of domestic equities at MFC Asset Management. Overseas funds have offloaded a net 76.6 billion baht worth of Thai stocks this year, the second-biggest sales after South Korea among 10 Asian markets tracked by Bloomberg.
"Domestic purchases are unlikely to help share prices rebound," said Mr Chakrit, whose firm oversees about $11 billion in assets. "The money is only a fraction of sales by foreign investors, who want to unload stocks here at any price."
Mutual fund companies, pension funds and other institutional investors accounted for about 8% of total share trading on the Stock Exchange of Thailand this year, according to data compiled by Bloomberg.
Overseas investors' share was about 20%, while individual investors accounted for 59% of total turnover. The remainder came came from brokerage investments, or so-called proprietary trade.
"Thai stocks may see further correction and more volatility over the next three to six months as monetary policy changes spur more overseas fund outflows," said Voravan Tarapoom, CEO of BBLAM, which oversees about $12 billion in assets.
"Still, we expect foreign funds to return this year," she added.