May 31 (Bloomberg) -- Thai stocks will rise 19 percent in the next year after the first monthly loss since September dragged valuations to a four-month low and the economy recovers from last year’s floods, according to JPMorgan Chase & Co.
The benchmark SET Index may climb as high as 1,350 in the next 12 months, Sriyan Pietersz, the investment bank’s Bangkok-based head of research for Southeast Asia, said by phone yesterday. The measure closed at 1,138.63 yesterday. Earnings may grow 20 percent in 2013 from an estimated 15 percent this year, he said. The SET traded at 11.4 times estimated profits in the week ended May 25, the lowest level since February.
“Thai companies will be able to sustain their strong earnings momentum in the second half, with an expansion in private investment and consumption,” said Pietersz, who was ranked No. 2 for Thai research by Institutional Investor magazine last year. “Companies, especially banks, will benefit.”
Thailand’s industrial output rose for the first time in eight months in April as more manufacturers returned to full production after the worst floods in almost 70 years last year, the government said on May 28. Gross domestic product unexpectedly grew 0.3 percent from a year earlier in the three months through March, after contracting 8.9 percent in the previous quarter, the government said on May 21.
The SET Index lost 8.5 percent this month to yesterday on concern the European debt crisis and a slowing Chinese economy will curb global growth. The gauge dropped 1.2 percent to 1,124.64 at 11:02 a.m. in Bangkok.
Overseas investors sold a net $497 million baht of Thai equities this month through May 29, poised for the first monthly selloff since November, according to data from the Stock Exchange of Thailand.
“Thai equities hit a little bump as the ongoing crisis in Europe and problems in China trigger the sale of riskier assets worldwide,” Chakrit Puechpan, head of domestic equity department at MFC Asset Management Pcl, which oversees about $9 billion of assets, said by phone yesterday. “They will rally again as economic fundamentals and corporate earnings are very solid.”
Pietersz joins Mark Mobius, chairman of Franklin Templeton’s Emerging Markets Group, and Kasikorn Securities Co. Ltd. in favoring Thai equities.
Mobius, who oversees about $50 billion of assets, said last month he is “overweight” Thai shares, while Kavee Chukitkasem, an investment strategist at Kasikorn, predicted on April 27 the stock index may rise to 1,350 in the third quarter.
Investors should buy shares of banks and property companies, which may lead a rebound in the benchmark index as loan growth accelerates and rising incomes increase demand for residential property, Pietersz said. He recommended investors avoid retailers and consumer-goods producers, as their valuations are “overly stretched.”
The SET Commerce Index has climbed 38 percent this year, the largest gain among 27 industry groups, after advancing 40 percent in 2011. The gauge trades at 27.2 times estimated earnings, more than double the multiple on the SET Index, according to data compiled by Bloomberg.
The SET Index has gained 9.7 percent this year on speculation a surge in government spending after the floods would bolster investment and consumption. The gauge trades at 11.5 times estimated earnings, compared with the MSCI Emerging Markets Index’s 9.6 times.
Prime Minister Yingluck Shinawatra pledged in January to spend 350 billion baht ($11 billion) on infrastructure, while the Bank of Thailand cut interest rates by half a percentage point since November to spur economic growth.
Investors should use any decline in share prices prompted by recent political tension as a chance to buy Thai stocks, according to Pietersz.
“I see more political noise, but not a risk,” he said.
Thai opponents of exiled former leader Thaksin Shinawatra rallied outside Parliament in Bangkok overnight to thwart efforts to exonerate him of a corruption conviction, in one of the biggest challenges to his sister’s nine-month-old government.
About 7,000 members of The People’s Alliance for Democracy, whose yellow-shirted royalist members helped remove two Thaksin-linked governments, would gather outside Parliament House, organizer Tul Sitthisomwong said by phone yesterday.
The protest risks reigniting a feud that has led to violent street protests claiming more than 100 lives since his ouster.
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