Despite projecting a short-term correction next month, the Thai bourse is projected to rise to an all-time high of 1,815 points in 2018 because of improved earnings of listed firms and recovery in private investment, says Asia Plus Securities (ASP).
The Stock Exchange of Thailand (SET) index is poised to drop in January because of redemptions of tax-saving long-term equity funds, but it should rise in February as fund flows return, said ASP vice-president Poranee Thongyen.
"Fund inflows are expected in February as foreign holdings of Thai equities stand around 31.2%, close to the lowest in a decade at 28.5%, so we project a return of foreign investors to the SET in next year's first quarter," said Mrs Poranee.
The SET's record high was set in January 1994, reaching 1,753.73 before tumbling 214.53 points during the Asian financial crisis.
The net profits of SET-listed firms in 2018 are expected to total 1.11 trillion baht, with earnings per share at 113.57 baht, a 14.5% year-on-year increase, she said.
Stocks in the construction sector are projected to record the highest growth in 2018 because the government will spend around 900 billion baht from its investment budget, with the implementation rate expected to be around 50%, said Mrs Poranee.
Other sectors anticipated to record good net profit growth in 2018 are retail, petrochemical, banking, commerce, media and tourism, she said.
The bourse, however, has a limited upside gain because the SET index had risen about 30% in 2016 and 2017, considered the second-highest return behind the US market, said Mrs Poranee.
ASP projects Thailand's economy to expand by 4.2% next year, thanks to the global economic recovery, especially in the US and Europe, she said.
Investment in the domestic private sector is expected to recover in next year's second half as the government will disburse an investment budget for infrastructure projects in the first half, said Mrs Poranee.
Such expenditure will also help propel a rise in private consumption, she said.
Mrs Poranee said next year's investment strategy will be separated into three themes, with the first identified as high dividend stocks, including PTT Exploration and Production Plc (PTTEP) and Intouch Holdings Plc (INTUCH).
The second theme is stocks benefiting from new investments, which include Sino-Thai Engineering and Construction Plc (STEC), Seafco Plc (SEAFCO), WHA Corporation Plc (WHA), and Thitikorn Plc (TK).
Media shares are the third investment, with attractive stocks identified as Plan B Media Plc (PLANB) and RS Plc (RS).
Although the banking sector has seen a decline in fee income from rising financial technology ventures, financial institutions have been investing in several new technologies, said ASP vice-president Usanee Liurut.
The banking sector's net profit growth for next year is expected to be around 14.5%, coming from increasing loan growth, loan recovery among small and medium-sized enterprises, and a decrease in capital reserves set aside for bad loans, said Ms Usanee.