Thailand's Stock Market Headed For The Sky

[george]

Thailand's booming stock market headed for greater heights -- if it doesn't melt

BANGKOK -- As Asia celebrates the start of the Year of the Monkey, the bull reigns supreme in Thailand.

Its booming stock market was the world's second top performer last year -- growing 117 percent.

While it's unlikely that 2004 will see the same dizzy boom, Thai shares are regarded as leading investments among many brokers.

Others though are becoming cautious. The market's rapid spike prompted concerns that speculation was driving the index higher, echoing the scenario before Thailand's disastrous economic crash in 1997. Back then, speculation, easy credit and share price manipulation drove stocks artificially high, swelling a financial bubble that inevitably burst.

But Prime Minister Thaksin Shinawatra has dismissed concerns of a repeat collapse. His government responded quickly when the market became too volatile late last year, instituting regulations limiting cost-free day-trading and tightening trading rules on shares in shady counters.

Thaksin blamed the problem of overvalued stocks on price manipulation carried out by a small number of brokerages and investors.

Optimism of continued strong growth remains relatively high.

Deputy Prime Minister Somkid Jatusripitak predicted the SET index could reach 1,000 points by the end of 2004 after closing out last year at 772.15. That projection is shared by prominent local fortuneteller Kengkaj Jongjaipra, who also warned that the influence of Rahu, the Hindu god of darkness, could encourage market manipulation.

Independent analysts were a bit more conservative. Ten brokerages polled by Dow Jones Newswires at the end of 2003 set 12-month targets averaging 840 for the index, but did not make clear if their projections considered Rahu's powers.

Most of the market confidence is based on the solid fundamentals underpinning the Thai economy.

The economy grew an estimated 6.4 percent in 2003, outpacing official predictions made at the beginning of the year, and shrugging off SARS concerns, terrorism fears and the war in Iraq. Thai exports also outpaced expectations despite a strengthening of the baht currency, lending further confidence to investors.

Thaksin predicts the economy will grow 8 percent this year and 10 percent in 2005.

Andrew Stotz, head of research for ING Financial Markets Thailand, said growth prospects are bright. He said the Thai stock market is still in the early stages of a recovery and last year's gains reflected a climb out of a distressed market.

Thailand is "kind of moving from an abnormal phase to a more normal situation," said Stotz.

He expects more foreign institutional investors and local retail clients to be drawn to the market.

The market is expected to favor blue chips firms -- such as banks -- whose performance has been lagging behind the market.

The government has also been promoting small and medium enterprises, even adding a junior board for them last year. But Pichai Lertsupongki, a strategist for KGI Securities said "optimism over small companies turning the corner is rather overdone. 2004 will be the year that blue chips rule."

Quality and quantity of listed firms will both improve this year, as the market's capitalization will increase substantially with several large initial public offerings, including some privatized state enterprises. There is expected to be an average of one IPO a week.

Local investors are also expected to keep a healthy hand in the bourse, if only for lack of an alternative, with interest rate at historic lows of 0.75-1.5 percent.

Thaksin, a telecommunications tycoon whose family serve as proxies for his holdings, was asked recently if he was steering the economy to his own benefit. His daughter, brother-in-law, and son were listed by a local magazine last year as the second, third and fourth richest shareholders in the country.

"It's fine if everybody in the ship can reach the shore safely," he told reporters. "And they include me and my family's companies."

--AP 2004-01-14