Thai institutional investors are picking up stocks at a record pace as an exodus of foreign money sends valuations to a nine-month low.
Domestic funds bought a net 32 billion baht ($1.03 billion) of Thai stocks this month through June 26, on course for the biggest monthly inflow since Bloomberg began compiling exchange data in 1999. Foreigners sold a net $2.15 billion of shares this month, heading for a record outflow.
Thailand’s SET Index has dropped 12 percent since Fed Chairman Ben S. Bernanke said on May 22 that policy makers may consider paring stimulus if the U.S. labor market improves, prompting investors to wipe as much as $5.3 trillion in value from global stocks. The slump drove the Thai gauge’s valuation to 11.8 times projected 12-month earnings on June 24, the cheapest since Sept. 5. The SET climbed 1.6 percent yesterday to close at its highest level since June 17.
“With the current valuation and corporate earnings outlook, equity investment may offer spectacular returns,” Saharat Chudsuwan, senior vice president of Tisco Asset Management Ltd., which oversees about $5.5 billion of assets, said by phone on June 26. “This is a great opportunity because the fund outflow hasn’t changed the fundamentals of the Thai economy and companies.”
Southeast Asia’s second-biggest economy may expand 5.25 percent in 2014, accelerating from a forecast 4.75 percent growth in 2013, the International Monetary Fund said on June 17. Earnings of companies in the SET Index may climb 32 percent over the next 12 months, according to data compiled by Bloomberg. That’s double the 16 percent growth forecast for companies in the MSCI Emerging Markets Index.
Saharat recommended shares of banks, retailers and building material producers whose revenue will benefit from domestic consumption growth. He declined to specify which stocks his funds bought or sold.
Saharat’s Tisco High-Dividend Equity Fund has jumped 20 percent this year, the best performer among 200 stock funds domiciled in Thailand, according to data compiled by Bloomberg. His company, a unit of Tisco Financial Group Pcl (TISCO), has joined others in Thailand trying to take advantage of a revival in domestic appetite for shares.
Tisco earlier this month raised about 500 million baht offering two new equity funds, according to Saharat. Tisco Asset has offered about 1 billion baht in new funds since June 20, according to a company statement on June 19.
BBL Asset Management Ltd., a unit of Bangkok Bank Pcl, Thailand’s biggest lender, plans to raise as much as 2.56 billion baht from a new equity fund offering between June 24 and July 2, according to a June 20 statement from the firm. The company was ranked as one of Thailand’s two top equity fund managers this year by Morningstar Inc., a fund researcher.
Purchases by domestic institutional investors will help bolster local shares, Vorapol Socatiyanurak, secretary general of the Thai Securities & Exchange Commission, said on June 21.
Foreign outflows may delay any stock rebound, according to Chakrit Puechpan, head of domestic equities at MFC Asset Management Pcl. Overseas funds have offloaded a net $2.87 billion of Thai stocks this year, the second-biggest sales after South Korea among 10 Asian markets tracked by Bloomberg.
“Domestic purchases are unlikely to help share prices rebound,” Chakrit, whose firm oversees about $11 billion of assets, said by phone from Bangkok. “The money is only a fraction of sales by foreign investors, who want to unload stocks here at any price.”
The SET Index (SET) plunged on June 24 to the lowest level since Dec. 18 before rallying for three days through yesterday. The gauge has slid 7.4 percent this month, heading for the biggest monthly loss since September 2011. That would be the first time since May 2010 that the index has declined when monthly inflows of domestic institutional investors into stocks topped 10 billion baht.
The index’s 30-day volatility measure rose to 32 yesterday, the highest level since November 2011.
Mutual fund companies, pension funds and other institutional investors accounted for about 8 percent of total share trading on the Stock Exchange of Thailand this year, according to data compiled by Bloomberg. Overseas investors’ share was about 20 percent, while individual investors accounted for 59 percent of total turnover. The remainder came came from brokerage investments, or so-called proprietary trade.
“Thai stocks may see further correction and more volatility over the next three to six months as monetary policy changes spur more overseas fund outflows,” Voravan Tarapoom, chief executive officer of BBL Asset, which oversees about $12 billion of assets, wrote in an e-mail on June 20. “Still, we expect foreign funds to return this year.”
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