SET surges to 11-year record

SET surges to 11-year record
Bangkok Post (12 October 2007)

Bull market fuelled by foreign investors Thai stocks closed up 1.6% yesterday _ their highest level in almost 11 years _ amid continued foreign buying in large-cap stocks. The Stock Exchange of Thailand index closed at 889.06 points, up 13.96, in brisk trade worth 33.92 billion baht. Energy stocks rose 3.24%, banks closed up 1.83% and transport shares gained 2.29% as the main index reached its highest point since December 1996. Foreign investors were net buyers of 2.83 billion baht worth of shares, with retail investors net sellers of 2.77 billon and local institutions net sellers of 63.39 million. The index is up 9.8% in the past month and 25% over the past 12 months. Sentiment was bullish as other regional markets closed mostly higher, with Tokyo up 1.64% and Seoul gaining 0.9% to a record high. Markets in Hong Kong, Shanghai, Singapore, Mumbai, Jakarta and Sydney also finished at record levels. Adisak Kammoon, a research head of KGI Securities, said foreign capital inflows propelled the Thai market yesterday. Interest rate cuts in the US in response to the sub-prime mortgage crisis have led to a shift in funds from equities to government bonds and bank deposits. Mr Adisak said fund managers were shifting back to equities, particularly in Asia, in search of higher returns. ''That's the main reason why Thai stocks have surged sharply over the past few days. Stronger foreign confidence toward the local market,'' he said. Analysts speaking at a investment seminar yesterday, said foreign inflows would help drive the main index higher next year, although a technical correction and profit taking could cause the index to drop to 840 points in the short term. Padermphob Songkroh, a deputy managing director of Bualuang Securities, said the Thai bourse would benefit from capital flows into Asia, as investors were boosting their positions in Asian currency assets on expected weakness in the dollar. ''Now, the shift of funds from the bond market to equities is getting clearer as the yield curve of one-year government bonds at 3.47% is not different from fixed deposits of 3.35%,'' he said. ''In fact, the return on investment in equities should be 1% different from bonds. If the gap is narrowing, it means that stock prices may rise more.'' Visit Ongpipattanakul, a deputy managing director for research at Trinity Securities, noted that stocks typically benefited in the months before an election.
Equities typically yielded 5% gains three months before a vote and 2% one month before an election, he said. ''The SET index has outperformed regionally and it has a chance to rise more. If the Japanese yen continues to slide, then yen carry-trade loans will return,'' Mr Visit said.
Yen carry trades are transactions that institutional investors finance with low-interest Japanese yen loans. Other analysts noted that net long positions in SET50 index futures had reached 2,200 contracts, and could increase by another 1,000 contracts pointing to further gains for the main index. Wetang Phuangsup, director of capital flow policy for the Finance Ministry, said inflows totalled $8 billion in the first eight months of 2007 and were expected to reach $9 billion by year-end. Mr Padermphob said improving political stability had helped overall sentiment, but noted that 60% to 70% of the stocks that posted gains this year did not rise because of politics. Risk factors next year would include volatility in commodity prices and the derivatives market, he said. Among the most active stocks yesterday, PTT rose 10 baht to 348, Krung Thai Bank closed up 60 satang to 12 baht and Thoresen Thai Agencies rose four baht to 68. PTTEP gained nine baht to 151 and Bangkok Bank rose 4 baht to 127.