Investor confidence in portfolios during the three months through May improved to bullish territory for the first time in five months, bolstered by election optimism and listed companies' financial performance, according to the Federation of Thai Capital Market Organizations' (Fetco) monthly survey.
Securities broker CGS-CIMB Securities (Thailand) Co is also bullish that the benchmark SET index will reach 2,000 points at the end of the year, while the Thai Bond Market Association (TBMA) expects imposition of the 15% withholding tax on gains from fixed income funds, coming into force from mid-year, will dampen investors' demand for bonds.
Fetco's Investor Confidence Index for March to May rose 11.9% to 130.68, entering the bullish zone and up from a neutral reading last month, said Paiboon Nalinthrangkurn, chairman of Fetco.
An index below 80 points is considered bearish, 80-120 is neutral and over 120 is bullish.
The banking sector drew the most interest as it is expected to benefit from the economic growth, while property drew the least because of an oversupply of condominiums.
The domestic political situation had the greatest positive effect on the index, while the greatest negative impacts came from international conflict, a global economic slowdown and instability following the election.
Global economic factors that need to be monitored include a possible rate hike by the US Federal Reserve and European Central Bank; Brexit negotiations, a GDP growth slowdown in Europe and the results of China's economic policy meeting to be held this month.
Kitichan Sirisukarcha, senior vice-president for research at CGS-CIMB Securities, said the SET index is targeted to soar to 2,000 points by the end of the year, driven by the positive impact of the election and listed firms' performance growth.
CGS-CIMB expects the SET earnings per share growth this year will be 6%, but will rise to 9% in 2020.
He expects Thailand's economy will continue to grow, underpinned by consumer spending, commerce, tourism and infrastructure projects, while geopolitical tensions will be eased.
Ariya Toranaprakit, senior vice-president at TBMA, said the withholding tax for fixed income funds could affect investment, as their return would likely be below banks' deposit rates.
Fixed income funds currently total 2.5 trillion baht, with the bulk invested in Bank of Thailand bonds and the Finance Ministry's short-term bonds.
For the first two months of the year, fund outflows from Thai bonds totalled 27 billion baht. The average bond maturity held by foreign investors rose from 6.72 years in 2018 to 8.22 years at present.
Investors shifted funds from bonds to high-risk assets after trade war conflicts had eased, and some investors switched money to invest in Indonesia and the Philippines where returns were 5-7%, a level above the Thai market.