Bualuang Securities (BLS) forecasts a bullish trend for the country's equity market this year, predicting the Stock Exchange of Thailand (SET) Index to reach 1,550 points in line with the global V-shaped recovery.
The SET target is based on a price/earnings (PE) ratio of 18 times and earnings per share (EPS) at 86 baht per share, said Chaiyaporn Nompitakcha- roen, deputy managing director for BLS's Non-Institutional Broking Group.
Global GDP growth this year is projected to hit 6.6%, led by China, whose economy has started to recover, with GDP growth there expected to reach 8.9%.
BLS forecasts the GDP of Asia ex-Japan to grow by 8.3%, while the US economy, which is expected to start recovery in the fourth quarter of 2020, is projected to see GDP growth of 5.5%.
"Global economies will pick up after the pandemic. Global trade and consumption will also accelerate as the US pumps in money while the interest rate will remain low for at least two years, driving investors to move their funds into risky assets for higher returns," Mr Chaiyaporn said.
In terms of the Thai economy, GDP is expected to grow by 4.4% in 2021 thanks to the recovery in global trade and government stimulus packages aimed at sustaining domestic consumption and reducing unemployment, while waiting for Covid-19 vaccines and the reopening of air travel.
He said Thai shares will indirectly benefit from the recovery of Asian stocks and global trade.
However, the performance of the Thai bourse would be lower than the regional average until exports and tourism show clear signs of recovery, which is forecast to happen in the fourth quarter of 2021.
"The movement of the stock market will normally predetermine the direction for the real economy for about 6-12 months. We will see an active stock market this year," said Mr Chaiyaporn.
He expects foreign investors to return to Thai equities next year after recording net sales valued at 278 billion baht over the past three years and a total of 631 billion since 2013.
Investors will focus on equities likely to see a swift recovery in profits rather than those with stable profits, said Mr Chaiyaporn.
BLS recommends cyclical stocks such as petrochemicals and logistics that are expected to benefit from the global and US economic recovery, stocks related to the debt management business, 5G technology and domestic consumption such as food, retail, personal finance and packaging.
Sectors that should benefit from mass immunisation such as tourism and air transport are also expected to see a recovery next year, he said.
In addition to equities, Mr Chaiyaporn suggests investors hold gold and property funds, while reducing bonds and fixed income to below 15% because of low returns and the prospect of future inflation.
