Pace of SET recovery under threat

The speed of the junta's execution of economic reforms is a factor in boosting the rising SET index further, but risks lie ahead that may tame the recovery of the Thai share market in the second half, says Maybank Kim Eng Securities.

Managing director Sukit Udomsirikul said if the military regime can execute policies in line with its schedule, the Stock Exchange of Thailand (SET) index should break 1,500 points by year-end.

"The SET index has already passed the worst sentiment after the end of the political stalemate," said Mr Sukit at the Capital Market Research Forum, arranged by the SET in Bangkok yesterday.

"The index may break 1,500 points, but when it can reach that point depends on how fast policies are executed by the National Committee for Peace and Order."

The SET index jumped by 6% within a month of the coup on the expectation that the junta would implement policies to revive the economy.

Most sectors posted gains except ICT, petrochemical and entertainment since policies concerning those sectors remain unclear. On top of that, tourism and transport are pressured by the current martial law and the disapproval of Western countries.

Maybank Kim Eng Securities projects GDP growth of 2.5% this year with listing firms' earnings growth of 10%.

Next year's index is likely to reach 4% with listings earnings of 11%, targeting a peak of 1,650 points.

The company is still monitoring the performance of the regime as it factors in its projection for the third quarter.

"The junta's policies are currently focused on liquidity injection, which will affect the economy faster than a monetary policy that might take months to see any improvements. Once investment can kick off, business activities will move forward immediately after the long delay," said Mr Sukit.

But these policies will fully boost the economy in the first half of next year.

Benjarong Suwankiri, director of TMB’s economic analysis centre, said megaprojects worth 600 billion baht will be next year’s key growth driver.

''We believe that we can see growth in the future and the SET index will continue to gain on strong fundamentals," said Mr Sukit.

However, Peerapong Jirasevijinda, deputy managing director of BBL Asset Management, warned that the monetary policy of large economies is another key risk for investors apart from the domestic factor.

"Many developed countries such as Europe and Japan have tried to deal with deflation and tend to use monetary policies or a near-zero interest rate to deal with the problem," said Mr Peerapong.

Changes in global interest rates have affected the movement of capital funds around the world including Thailand's capital market.

Mr Peerapong recommended the equity market as returns from assets will be able to beat inflation.

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