Set To Break Through 1,000 In 2005

[george]

BROKERS FORECAST:

SET to break through 1,000 in 2005

BANGKOK: Brokers yesterday painted a rosy stock-market picture for the coming years, saying the Stock Exchange of Thailand (SET) index was primed to pass the 1,000-point mark in 2005.

However, they warned investors against getting their fingers burnt on highly speculative stocks.

Brokers said they believed the stock index would surge comfortably beyond 800 points next year on the back of solid economic fundamentals.

Yesterday, the SET rose 5.49 points to close at 646.64.

“Next year, PE [price-earning ratio] is set to be 10-11 times. The index for 2004 could be somewhere between 801 to 881 points. For 2005, the PE will be 11 times and the index is likely to go to 1,013 points,” said Sombat Narawutthichai, vice president of Ayudhya Securities.

The PE ratio – the price of a stock divided by its earnings per share – roughly indicates how much investors are paying for a company’s earning power. The higher the figure, the more investors are paying.

SET chairman Vijit Supinit also encouraged investors to invest in the stock market, saying the economy would continue to grow for at least another eight years.

“Investors should be in a hurry to invest in the stock market now, because our economic fundamentals are strongly supporting the bourse – and the stock market directly reflects the economic outlook,’’ he said, adding that Thailand was in the second year of a 10-year economic cycle.

Vijit pointed to several positive factors supporting growth, including GDP growth, the improved performance of listed firms, a sovereign credit-rating hike and low PE ratio.

Brokers said investors should buy stocks selectively for both future capital gains and dividend payments, with returns expected to be higher than bank deposit rates for several years.

“From now until the middle of this month, you can still pick up stocks. It’s still not too late, as many stocks are still interesting,’’ said Montree Sornpaisarn, CEO of Kim Eng Securities (Thailand).

“This year, listed firms’ [profits] grew 30 per cent. Next year, they’re going to grow at least 19-20 per cent.”

Montree said economic fundamentals should drive the stock index to 735 points next year but public sentiment could propel it beyond 800 points.

However, he warned investors against focusing too much on speculative stocks at unrealistically high prices.

“You must be careful because when dealing with speculative stocks you don’t know exactly when to sell safely,” he said.

Sombat predicted profit growth for listed firms of 20-22 per cent next year and 15 per cent the following year.

But he warned there were still a number of factors which could hurt growth, including terrorism in key markets, rate hikes in key markets, stock volatility, new stock-market measures and steps by officials to curb economic overheating.

Suvabha Charoenying, managing director of National Securities, predicted the index would comfortably surpass 800 points next year.

She said unlike past years when stocks were sluggish at the end of the year, particular in December, this year foreign investors were still injecting money into the equity bourse to maintain its bullish sentiment.

In addition, at least 10 new stocks will be listed this month, she said.

“If we view the stock market as a ship, its engine is currently at full steam ahead,” she said.

Finance Reporters

--The Nation 2003-12-02

[JonnieB]

I would say the next CRASH in the Thai economy is likely to happen before then. Like maybe next year...isn't that when the 3 year farmers debt moritorium expires and all those farmers who have used this three year grace period to improve their herds, invest those extra funds in improved farming technology and planted higher value crops, and not of course, running out and paying off all their high interest loan-shark debt, buying that new Isuzu pick-up, or the latest mobile phone with a camera to take pictures of Bessie the cow, so they will have ample and high-value crops to harvest and start paying back all the money they borowed previously and all the new debt (ops...investments) they made in the past 3 years.

When even the blind realize that the Thai ecomony has no clothes and that the economic boom of the past couple years has been built on a house of cards with a foundation of debt, and the farmers are the first of all the rest to default and have no means to pay back any of their borrowings, the whole edifice will come crashing down around Khun S's head.

[The_Moog]

A crash is very unlikely next year.

Expect to see 10%-15% on house prices, SET at about 750-800 and interest rates a little higher, which will crimp demand.

...and for the edification of Jonnie and other Isaanophiles, soapy prices staying flat but downside on water-buffalo futures and teachers salaries.

Sorry I can't be more ebullient or a doom-monger. Its the 'Middle Way'.

[pnustedt]

I reckon that the future course of the SET depends largely on geo-political issues over which Thailand has little control. If Sadam and Osama are captured, oil flows freely from Iraq and the American economy booms then the SET could well see the 25% increases that are being forecast.

However, if the unthinkable happens then Thailand will suffer with everyone else.

That said, I do think that Thailand is one of the most promising countries in the region for investment.

[The_Moog]

Exogenous occurences are important of course, and if a dirty nuke goes off in Times Square, then all bets are off !

Thailand though is proving surprisingly resilient to foreign factors, as they are usually short term in nature.

Only 6 months ago, everyone was writing off the Thai hotel industry because of SARS. Now occupancy rates in 5* hotels are strong once again.

[davidm]

Predicting where the SET will be in over a year's time is plain foolish, but that's Mr. Vijit's forte. I reckon the current bubble has two more years before it bursts, splattering everyone in the vicinity.

That doesn't mean money won't be made on the SET next year. Just be careful when placing your bets.