Thai Stock Inflows to Rise as Worst Over, Bourse Chief Says

  • October inflows of $147 million are best for any month in 2015
  • Public spending opens up investment opportunities, Mobius says

Thailand’s stock inflows are poised to extend the biggest monthly gain this year as the government takes steps to boost the economy and the U.S. delays an increase in interest rates, according to the head of the nation’s bourse.

The Southeast Asian nation will continue to lure back overseas funds as government incentives for home purchases and increased spending in rural areas will spur the economy and earnings growth, Sathit Limpongpan, chairman of the Stock Exchange of Thailand, said in an interview in his Bangkok office on Wednesday. Foreigners are also chasing higher yields as the Federal Reserve is seen maintaining borrowing costs this year, he said.

Thailand’ benchmark SET Index has gained 4.2 percent this month through Wednesday, after three straight monthly declines, the longest losing streak since January 2014. The advance has been fueled by inflows, with the $147 million plowed into the market in October heading for the most since November 2014. The purchases come after foreigners pulled as much as $2.9 billion from stocks in the previous four months, prompting a 7.3 percent slump in the baht, and the World Bank to join the Bank of Thailand in reducing growth forecasts amid sliding exports and lackluster local demand.

“The worst period for Thai stocks has already passed as the big concern about the U.S. rate increase has faded substantially,” Sathit said. “Foreign investors also appear to be impressed with the government’s proactive policies in boosting the economy.”

Thailand’s junta regime, led by Prime Minister Prayuth Chan-Ocha who seized power in a military coup in May 2014, on Tuesday announced a reduction in the fees for property transfers and mortgage registration to spur the industry. The measures came after the government last month approved 136 billion baht ($3.9 billion) in stimulus such as fund injections into village and provincial projects.

The government will allow private companies to invest more on infrastructure projects, Deputy Prime Minister Somkid Jatusripitak said on Sept. 24. Thailand will start five projects with a total value of about 198 billion baht in partnership with the private sector this year, according to Kulit Sombatsiri, director-general of State Enterprise Policy Office.

The probability traders assign to the possibility that the Fed will raise rates this year has fallen to 27 percent from more than 60 percent at the end of August, according to data compiled by Bloomberg.

Volatile Flows

The SET trades at 13.8 times its projected 12-month earnings, down from this year’s peak valuation of 15.4 times in February. The MSCI Emerging Markets Index trades at a multiple of 11.4. The Thai stock gauge climbed 1.4 percent to 1,425.32 at the close in Bangkok on Thursday.

Not everyone is optimistic that fund inflows can maintain their current pace, according to Voravan Tarapoom, Bangkok-based chief executive officer at BBL Asset Management Co. Inflows will continue to be “very volatile,” said Voravan, whose BBL-Bualuang Top-Ten Fund has returned an average annual return of 17 percent over the past five years, beating 99 percent of peers.

“Foreign investors remain cautious on political concern, economic slowdown and weak earnings,” said Voravan.

The military government’s accelerating spending on infrastructure will open up investment opportunities, Mark Mobius, chairman of the emerging-markets group at Franklin Templeton Investments, said in an interview in Bangkok on Wednesday.

“The government has realized the urgent need for state spending and stimulus, as a delay would further derail the economic recovery and disappoint most investors,” said Sathit.

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