Bulls eyeing Thai stocks as country's economic recovery strengthens

Bangkok

THAILAND'S stock market is one of the world's best performers this quarter and may climb further on surprisingly strong economic growth, according to a US$44 billion fund manager.

A report on Monday showed that gross domestic product expanded 4.6 per cent, more than many economists expected, signalling that investment and consumption will spur earnings growth, said Narongsak Plodmechai, chief executive officer of SCB Asset Management Co in Bangkok.

"Strong economic growth should help Thai equities fend off higher volatility in global financial markets as trade tensions linger," Mr Narongsak said on Tuesday. The benchmark SET Index may reach at least 1,800 this year, he said. That's about 6 per cent higher than Tuesday's close.

The index has climbed 7.4 per cent this quarter in dollar terms, behind only Mexico among benchmark stock indexes tracked by Bloomberg. SCB Asset Management, Thailand's biggest private money manager, joins Morgan Stanley in turning more bullish on the Thai market, where international funds have withdrawn more money than they've invested each month for almost a year.

Banks, property developers and auto-part makers will be the main beneficiaries of the Thai economic recovery, Mr Narongsak said.

Morgan Stanley rated Thai stocks as among its top defensive picks in South-east Asia amid a wider emerging market rout, strategist Sean Gardiner said in a Bloomberg television interview on Aug 16.

Overseas investors have withdrawn a net US$78 million from domestic equities so far in August, headed for the 11th month of outflows, according to data tracked by Bloomberg. Thai stocks are rebounding from a 10 per cent slide from April through June, their worst quarter in three years.

But there are still risks to negotiate, including a potential rise in Thai-land's benchmark interest rate that could pose a headwind for some companies. Economic expansion and higher energy prices may fan domestic inflation, according to Mr Narongsak.

Bank of Thailand governor Veerathai Santiprabhob struck a hawkish tone on Monday after the growth report, saying officials are waiting for the right time to consider what would be the first interest rate hike since 2011. BLOOMBERG