Thai Stocks May Extend World-leading Rise Into '04

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Thai stocks may extend world-leading rise into '04

BANGKOK, Dec 30 (Reuters) - Thailand's stock market, the world's best performing bourse in 2003, still has legs to run next year but the gains will be less spectacular, analysts said on Tuesday.

Fuelled by a booming economy, higher corporate earnings and a raft of new listings, Thai shares have soared 113 percent so far this year, beating a 96 percent rise in Brazil's Bovespa index.

"It's combination of a good economic story and low valuations," said Pichai Lertsupongkit, strategist at KGI Securities.

"The uptrend will continue in the next few years as many industries such as chemical, energy and construction are on an upward momentum."

Thai stocks hovered near a seven-year high on Tuesday, the second last day of trading in 2003. The key SET index was up 1.9 percent at 761.29 points at the midday break.

Analysts expect the index to end next year at 850-880 points, up 12 to 16 percent.

They argue Thai equities are still cheap compared with their regional peers, at an estimated price-to-earnings ratio of 13.6 times versus 16.7 times for Singapore, 15.3 times for Malaysia and 23 times for Japan's Nikkei 225 index.

The banking, energy, building material, construction and petrochemical sectors would be the bourse's main drivers in 2004, they said.

Top picks include Siam Cement, the biggest industrial conglomerate, oil and gas firm PTT, the biggest commercial bank, Bangkok Bank, and top mobile phone firm Advanced Info Service.

"The banking sector is expected to outperform the market this year due to its current undemanding valuation and strong earnings per share," Andrew Stotz of ING Securities said in a report.

FAR BELOW HIGH

The index is far from its record high of 1,789.16, posted on January 2, 1994, when Thailand's bubble economy enjoyed impressive double-digit growth rates before the Asian financial crisis.

In 2003, the country led by "CEO-style" Prime Minister Thaksin Shinawatra sealed its rebound from the crisis it unleashed six years ago with the devaluation of the baht. It posted economic growth of 6.5 percent year-on-year in the third quarter.

The economy is forecast to grow seven to eight percent next year, powered by capital spending from corporates and robust export growth on the back of a U.S.-led global economic recovery.

Historic low interest rates and a government stimulus package have also fuelled a consumer spending boom at home, although a major risk for the market next year is a possible rate hike.

"Thai interest rates are now probably at the bottom with an upward trend becoming apparent," said Thanawat Patchimkul, head of research at DBS Vickers Securities.

Companies in the banking and building materials sectors are expected to benefit from a booming property market next year, and accelerated public infrastructure spending as Thaksin's government gears up for a general election in 2005.

"2004 will be the first year to see lending growth outpacing GDP," said KGI's Pichai, who expects the economy to grow between 6.0 percent and 6.5 percent in the next five years.

Foreign funds have sold $457 million of Thai shares this year, according to data from Nomura International. But some analysts played this down, saying foreign investors have piled up stocks in public offerings.

"In fact, foreign investors were net buyers of Thai shares in the primary market worth about 11-12 billion baht during the first 11 months of 2003," DBS's Thanawat said.

Some analysts expect longer-term foreign investors will come back as they anticipate Morgan Stanley Capital International will increase Thailand's weighting in its benchmark indices next year.

The market's capitalisation of about $109 million makes it the second-biggest stock market in Southeast Asia after Singapore's. ($1=39.56 baht)

--Reuters 2003-12-30