Biggest Thai Investors Say Stocks Are Too Expensive

Two of Thailand’s biggest money managers say the surge in stocks that sent the benchmark SET Index into a bull market yesterday has gone too far, too fast.

The nation’s Social Security Office, which invests pension contributions from local workers, is holding cash in anticipation of a market decline, Win Phromphaet, the SSO’s head of investments, said at a conference in Bangkok yesterday. Investors are too sanguine about the prospects for economic growth after the army seized control of the government on May 22, according to Prasert Khanobthamchai, the chief investment officer at Kasikorn Asset Management Co.

The money managers are skeptical the rally will last after the benchmark SET Index jumped 20 percent from this year’s low on bets the military government will fast-track measures to revive the economy. The stock measure is valued at 13.5 times estimated 12-month earnings, 14 percent more expensive than the five-year average. The MSCI Emerging Markets Index trades at a multiple of 10.9.

“Thai stocks have limited upside now as several share prices have exceeded our price targets,” said Win, who invests about 100 billion baht ($3 billion) in domestic equities. “We are holding cash and very cautious.”

Overseas investors unloaded a net $36 million of Thai stocks yesterday, a fifth day of net selling and the biggest outflow in two weeks, according to Stock Exchange of Thailand data. They had added $250 million to holdings in the six days to June 9.

Bull Market

The SET Index climbed 1.1 percent to 1,471.85 yesterday, entering a bull market after rallying from 1,224.62 on Jan. 3. Shares of professional services and technology companies led yesterday’s advance, which sent the gauge to the highest level since October. The equity measure fell 0.1 percent to close at 1,471.02 today.

“We have to be very careful and be selective on each stock as the overall market’s valuation is quite high,” said Prasert, who helps oversee about $28 billion of assets at Thailand’s biggest private money manager. “Investors are too optimistic about the economic outlook.”

Thailand’s economy contracted 0.6 percent in the first quarter from a year earlier, missing the 0.4 percent increase predicted in a Bloomberg survey. Total visitor arrivals to the country declined 20 percent after martial law was declared May 20, according to the tourism ministry.

Stock Buyers

Thai stocks have outgained regional peers since May 22, when the army took over, as firms including BBL Asset Management Co. and the Thai unit of Aberdeen Asset Management Plc, two of the nation’s best performing funds, added to equity holdings. The military, which took power for the 12th time since 1932 amid escalating tensions between opposition politicians and former Prime Minister Yingluck Shinawatra’s party, has curbed violent protests and unveiled plans to speed up infrastructure spending, including a train project that was ruled unconstitutional under Yingluck’s government.

Increased political stability may help the SET Index reclaim its record high reached in 1994, a gain of about 19 percent from current levels, according to Prinn Panitchpakdi, Thailand country manager at CLSA, an Asian broker. Investors are optimistic there will be a revival of domestic consumption and investment, he said yesterday from Bangkok.

Southeast Asia’s second-biggest economy may expand as much as 2.5 percent this year, led by a recovery in local consumption and an acceleration of state spending following the coup, according to a private industry group that includes the Board of Trade, Federation of Thai Industries and Thai Bankers’ Association.

The SET’s 14-day relative strength index was at 69.7 yesterday, approaching the 70 level that some traders see as a signal an asset is overbought.

“We’re waiting for an opportunity for share prices to make another correction so we can buy at a cheaper level,” Win said. Most share prices already reflect a positive outlook for the economy and corporate earnings, he said.

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