Global fund flows are expected to move into equity investment rather than bonds because the latter's investment return has started to decline, says Trinity Securities.
Capital flows are anticipated to migrate to emerging countries, especially Thailand, Indonesia and the Philippines, because of promising economic growth ratios, said managing director Visit Ongpipattanakul.
The currencies of emerging countries, especially Thailand, Indonesia and the Philippines, have strengthened against the greenback, signalling an investment incentive for foreign investors, he said.
The baht's value has appreciated by 2.78% year-to-date, while the peso and rupiah strengthened by 0.44% and 1.52%, respectively, according to Reuters.
Returns from global bond investment, including Thai bonds, have started to decline and could be in negative territory on a mark-to-market basis, Mr Visit said.
Global fund flows are poised to move to other asset classes to search for higher yields and strong currencies as the global economy enters a maturing phase, he said.
"Foreign investors have started to embark on accumulative purchases of Asian equities, excluding China, for over US$800 million (25.4 billion baht) during the first two weeks of January," Mr Visit said. "Most of the fund flows have moved into South Korea and Indonesia, while it is expected that foreign fund flows will move into Thailand in the second half."
Concerns over Thailand's risk factors are expected to dissipate in the second half after the general election is held, he said.
The election is a key risk keeping a lid on investor confidence, Mr Visit said.
Apart from emerging-market equities, many asset classes have offered positive returns since the beginning of this year, such as oil, gold and developed-market stocks, he said.
"I believe foreign fund flows will move to the stock markets at a greater extent and foreign investors will be seen as net buyers of equities for the whole year," he said, "because equity investment offers higher returns than the 10-year US Treasury note, with a return gap of around 4.7% between these two asset classes."
Equity holdings of foreign investors in Thailand's stock market, meanwhile, are nearing a 14-year low at 29% of total market capitalisation, according to Trinity Securities.
Trinity Securities forecasts the Stock Exchange of Thailand to move in a range of 1,500-1,800 points with a forward price-to-earnings ratio of 13-15.6.