Thai Stock Index May Rally 12% More, Kasikorn Says

Thailand’s stocks may gain a further 12 percent as a rebound in consumption and investment following the nation’s worst floods in almost 70 years boosts corporate earnings, according to Kasikorn Securities Co.

The benchmark SET Index may climb to as high as 1,350 in the third quarter, Kavee Chukitkasem, an investment strategist at top-ranked Kasikorn Securities, said in a phone interview today. That would be highest level since April 1996. Investors should buy banks and energy shares, which may lead gains in the index as loan growth accelerates and fuel prices climb, he said.

“Thai equities still have more room to gain with a fast rebound in consumer and business spending following the floods,” said Kavee. “Earnings of banks and oil companies will sustain solid growth after their spectacular performance in the first quarter.”

The SET Index (SET) has jumped 18 percent this year, the third- best performer in Southeast Asia, as overseas investors bought a net $2.7 billion of Thai shares on optimism the government’s increased spending on reconstruction after the floods will bolster investment and consumption. Prime Minister Yingluck Shinawatra has pledged to spend 350 billion baht ($11 billion) on infrastructure and the Bank of Thailand cut interest rates to spur economic growth.

Correction First

Kavee joins Mark Mobius, chairman of Franklin Templeton’s Emerging Markets Group, in favoring Thai equities. Mobius, who oversees more than $40 billion, said on April 5 he is “overweight” on Thai shares and recommended banks and energy stocks.

Kasikorn Securities, a unit of Kasikornbank Pcl (KBANK), Thailand’s fourth-biggest commercial lender, was ranked the nation’s top research house in the latest survey by the Securities Analysts Association, a Bangkok-based equity analysts group.

Kavee in June predicted a rally in Thai shares following the general election. The SET Index surged 4.7 percent on July 4, the biggest gain in 14 months at that time, after Yingluck’s Pheu Thai party won a landslide victory.

Still, the benchmark stock index may drop as much as 10 percent this quarter after recent rallies, said Kavee.

‘Risky Period’

“The stock market is in the risky period for a big correction as many companies’ valuations are far above their historical average,” said Kavee. “The market’s short hiccup will pave the way for further rallies later this year.”

Thai stocks traded at their narrowest discount to their Asian peers in more than three months. The SET Index’s price-to- estimated earnings was at 12.55 times, compared with 12.61 times for the MSCI Asia Pacific Index on April 24, according to data compiled by Bloomberg.

His top picks include Siam Commercial Bank Pcl (SCB), after the nation’s third-biggest bank by assets reported “strong earnings” in the first quarter. The bank on April 18 posted net income of 10.34 billion baht ($335 million) in the three months ended March 31, higher than the 9.03 billion-baht average estimate of seven analysts surveyed by Bloomberg.

Kavee recommended PTT Pcl (PTT), the country’s biggest energy company, as high fuel prices will boost profit at its refinery units. He also likes Amata Pcl (AMATA), the largest developer of industrial land, and Home Product Center Pcl (HMPRO), the No.1 retailer of home improvement hardware.

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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