Thai Stocks to Sustain Rally on Local Buying, Credit Suisse Says

Thailand’s stocks will extend a rally that’s sent the benchmark index to a 19-year high, driven by domestic retail investors and low interest rates, according to Credit Suisse Group AG.

The SET Index may rise to 1,712 this year, a 12 percent advance from yesterday’s close, Dan Fineman and Siriporn Sothikul, analysts at Credit Suisse, wrote in a note today. The gauge climbed 0.2 percent to 1,532.17 at 10:11 a.m. in Bangkok.

“Surging domestic liquidity should carry the SET to a 19-year high this year,” according to the report. “Interest rates should remain low, economic data should stay healthy and valuations for most large caps are not stretched. We do not see serious risks until the second half.”

The Bank of Thailand maintained its benchmark interest rate unchanged at 2.75 percent on Feb. 20, the lowest level since April 2011, as domestic consumption and exports rebound and economic growth accelerates. Gross domestic product expanded a more-than-estimated 18.9 percent in the fourth quarter, the government said on Feb. 18.

The SET has gained 9.8 percent this year, climbing to its highest level since January 1994 on Feb. 20. The measure trades at 13.8 times projected 12-month earnings, compared with the Philippine benchmark index’s 18.5 times, Indonesia’s 14.4 times and Malaysia’s 14, according to data compiled by Bloomberg.

Retail Driven

“Evidence of a retail investor-driven, liquidity-fuelled rally is now manifold,” according to the report. “Local trading as a percentage of total volumes has surged. Foreign net buying is among the lowest in Asia this year.”

Overseas investors have bought a net $72.8 million of Thai stocks this year through yesterday, 95 percent less than the same period last year, according to data compiled by Bloomberg. Local institutional investors including mutual funds and insurance companies were net buyers of 11.8 billion baht ($396 million) of local shares in February, the data show.

Rising asset prices and accelerating inflation may pose risks to stocks in the second half of the year, according to the report.

Property and hotel stocks are the “top short-term sectors,” the brokerage said, recommending LPN Development Pcl, Asian Property Development Pcl and Supalai Pcl for their “cheap multiples, rapid growth and strong first-half launch pipelines.”

Central Plaza Hotel Pcl and Minor International Pcl offer “great growth coming off a cyclical trough,” the brokerage wrote.

Charoen Pokphand Foods Pcl is the top pick for investors with “a 12-month view” as declining feed costs and a recovery in meat prices boosts earnings, according to the report.

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