The Thai stock market will remain highly volatile in the second half of next year regardless of politics, as other downside risks will still weigh on the market, says an asset management firm.
Win Udomrachtavanich, the president of One Asset Management, said the market should rebound in the first half following panic selling towards the end of this year on the political face-off.
But three risk factors await in the second half. The US Federal Reserve may still be unclear about the timing to scale down its stimulus packages.
As well, there will be risk from rising interest rates, while local political issues are unpredictable.
The index should fall to between 1,400 and 1,500 points in the second half on those three factors, said Mr Win.
"We foresee the Stock exchange of Thailand (SET) index in a range of 1,450 to 1,690 points next year after a panic sell-off on local politics in this quarter. But the market will likely regain and even reach its peak in the first half," said Mr Win.
He said the Fed will send signals to markets more often next year.
"Once the policy rate is raised, businesses and listed companies will need time to adjust themselves to cope with higher financial costs. The trend will depress listed companies' operating results next year," said Mr Win.
Meanwhile, politics will continue to be a concern for investors.
"Thailand needs to invest in infrastructure under the 2-trillion-baht budget to help improve our competitiveness. The number of applications for Board of Investment privileges is declining, indicating the need to improve our competitiveness."
He said public investment is also essential to help spur local consumption, especially in the second half, when the country will face several threats.
Thus, he suggests investors diversify 60% of their portfolio to foreign assets. Of that portion, 10-15% each should be in the US and Japan and 5-10% in Europe, as these economies have started to recover.
As well, part of the foreign portfolio should be in China and real assets such as property funds in Singapore.
About 40% of the portfolio should be invested in Thailand, where equities still give the highest return compared with other types of assets of comparable risk.
Mr Win also recommends debentures, private bonds issued by low-risk companies and property funds, all of which yield more than 4%.
"Many companies will issue bonds and set up property funds next year," said Mr. Win.
The SET shed 1.22% to close at 1,359.07 points yesterday in relatively thin trade worth 34.7 billion baht.
Local institutional investors were net sellers of 3.42 billion baht, brokers of 1.14 billion and foreign investors of 2.4 billion, while local investors were the only net buyers of 6.96 billion.