March 28 (Bloomberg) -- Thailand stocks may fall as much as 10 percent in the second quarter, led by this year’s top performing consumer and telecommunication stocks, as valuations soared to the highest levels since at least 2007, according to the nation’s top-ranked fund manager.
The benchmark SET Index may rebound to 1,300 in the second half of the year following a “correction” as economic growth boosts companies’ earnings, Prapas Tonpibulsak, the chief investment officer at Krungsri Asset Management Ltd., said by phone today from Bangkok. The SET closed at 1,207.29 yesterday. Morningstar Inc., a fund researcher, this month ranked two of Prapas’s equity funds as the nation’s top stock funds in 2011.
Shares of Thai retailers and mobile-phone companies led an 18 percent climb by the SET this year to yesterday on optimism spending by the government after the nation’s worst floods in almost 70 years will spur economic growth and consumption. A measure of consumer-related shares trades at 27.7 times estimated profit, the highest level since Bloomberg began collecting the data in 2006. A gauge of phone stocks is valued at 19 times, the most expensive level since December 2007.
“Retailers and telecommunication companies will face higher selling pressure as they are rising too much and too fast,” said Prapas, who oversees about $3.7 billion of assets at Krungsri. “That would lead the overall market’s consolidation in the second quarter before another rally.”
The SET index lost 0.3 percent to 1,204.2 as of 11:50 a.m. in Bangkok. The gauge is poised for the biggest quarterly gain since the three months to September 2010. Overseas investors bought a net 79 billion baht ($2.57 million) of Thai stocks this year, compared with net sales of 5.1 billion baht in 2011.
The SET Commerce Index, which comprises 13 retailers and consumer-goods producers, has climbed 32 percent this year, the largest gain among the bourse’s 27 industry groups, after advancing 40 percent in 2011. The SET Information & Communication Technology Index, which tracks 27 mobile-phone and telecommunication companies, has climbed 29 percent in 2012, extending a 43 percent increase last year.
The Krungsri Dividend Stock Fund, one of Prapas’s two top-ranked funds, gained 28 percent in the past year, beating 90 percent of its peers, data compiled by Bloomberg show. The Krungsri Dynamic Fund has climbed 21 percent in the past 12 months, beating 83 percent of funds in its peer group.
Prapas advised investors to buy shares of energy companies and banks. Higher crude prices and a rebound in petrochemical prices will boost profit at oil producers and refiners, he said. Investments in flood-protection projects by the government and the rebuilding of damaged factories will bolster loan demand, he said.
The SET Energy & Utilities Index, which tracks 24 oil and utility companies, has risen 10 percent in 2012 after a 7 percent drop last year. A gauge of commercial banks has rallied 22 percent this year, on course for the best quarterly performance since the three months to September 2010.
Prime Minister Yingluck Shinawatra has pledged 350 billion baht for flood prevention and the Bank of Thailand cut interest rates for a second straight policy meeting in January to revive the economic growth. The finance ministry said on March 26 Southeast Asia’s second-biggest economy may expand as much as 6 percent in 2012, higher than an earlier prediction for growth of about 5 percent.
“Higher energy and petrochemical prices should help energy companies’ shares in 2012 after a very poor performance in 2011,” said Prapas. “Banks will maintain their high lending growth with the increase in state investments and consumer spending.”
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