Thai Banks, Retailers to Lead Stock Rebound After Elections, Top Fund Says

Thailand’s banks and retailers are set to lead a rebound in the nation’s equities in the second half, as their earnings will benefit from increased government spending, Ayudhya Fund Management Co. Ltd. said.

The SET Index may climb to 1,200 in the second half, a 17 percent gain from yesterday’s close, as concern over political tensions may ease following a July 3 election, said Prapas Tonpibulsak, chief investment officer at Ayudhya Fund. Prapas’s AYF Dividend Stock Fund (AYFSDIV) rallied 62 percent last year and was jointly ranked top among the nation’s equity funds in a survey by Morningstar Inc., a mutual-fund research company.

“The nation’s overall economy will receive a big boost from state spending once the new government implements its promised policies,” Prapas, who helps manage about $3.1 billion of assets, said in a phone interview today. “Overseas investors’ anxiety over political instability should also subside after the new administration is formed.”

The SET Index has lost 5.5 percent in June as overseas investors withdrew $718 million from Thai shares amid concern the election will revive political tension. The drop was the second-biggest among Asia’s 12 largest markets, after Hong Kong’s Hang Seng Index. Goldman Sachs Group Inc. and Credit Suisse Group AG advised investors this month to reduce holdings.

Prime Minister Abhisit Vejjajiva’s Democrat party is facing a challenge in the elections from the Pheu Thai party, led by the sister of Thailand’s former leader Thaksin Shinawatra. Thaksin was ousted in a 2006 coup and has lived abroad since fleeing a jail sentence for abuse of power three years ago. Demonstrations against Abhisit’s government last year left more than 90 dead.

‘Buying Opportunity’

The recent sell-off presents a “buying opportunity” for Thai equities, Suchart Techaposai, a Bangkok-based analyst at Citigroup Inc., said in a report on June 21. “If history is any guide, the market has rallied post political climaxes” such as the 2006 military coup, the airport blockade in 2008 and the May 2010 riots in the capital, he said.

Bank shares, which led the slump in Thai equities this quarter, will rebound in the second half as higher state expenditure and slower inflation boost loan demand from companies and consumers, said Prapas. Retailers will also benefit from increased spending from individuals as the economy expands, he said.

The SET Banking Index has dropped 7.9 percent this quarter, the third-worst performer in the bourse’s 27 industry groups, according to data compiled by Bloomberg. The SET Commerce Index, a gauge of retailers, has rallied 9.3 percent in the period, the second-biggest gain.

Siam Makro Pcl (MAKRO), the nation’s largest cash-and-carry wholesaler, CP All Pcl (CPALL), the No. 1 convenience store operator, and Tisco Financial Group Pcl (TISCO) are among the biggest holdings in Prapas’s fund, according to data on the company’s website. The fund manager said he still favors those stocks.

Siam Makro has gained 8.8 percent this year, CP All has risen 8.9 percent and Tisco has dropped 11 percent.

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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