Thai stocks have broken all expectationsand brokers and securities analysts said the nine-month bull
market on the Securities Exchange of Thailand (SET) should last
through 1987.
    Most had earlier dismissed a forecast by a local newspaper
last December that the SET Index would rise 50 points to 250 by
mid-1987. They said the figure is now within easy reach.
    The index, an average of the 93 registered stocks listed on
the market, gained 9.7 pct this month to finish the first
quarter at 228.97.
    The index has gained 74 pct since last July after declines
of two pct in the first half of 1986 and five pct in 1985.
    Yothin Aree, assistant managing director of Bangkok First
Investment and Trust Ltd (BFIT) echoed most analysts in saying
that, barring dramatic increases in oil prices and world
interest rates, the market will sustain its rally for the rest
of the year, punctuated by periodic corrections.
    Securities analysts said stocks are the best investment
because of excess liquidity, which has forced interest rates to
10-year lows. Bankers expect deposit rates, which have fallen
six times since January 1986, to stabilise this year.
    Central bank governor Kamchorn Sathirakul told commercial
banks last week they should spur loan demand by cutting lending
rates without a matching reduction in deposit rates.
    SET statistics show daily trading in listed corporate
stocks and government bonds averaged 217 mln baht during the
first quarter, about 4.5 times higher than a year ago.
    Robert Chan, deputy managing director of Wardley Thailand
Ltd, said foreign interest in Thai equities is strong and a few
Japanese fund managers recently approached him for the first
time to seek advice on investing in the market.
    Wardley Thailand, affiliated with The Hongkong and Shanghai
Banking Corp, handles stocks acquired by many foreign fund
managers investing in SET.
    "We thought six months ago that Thai stocks might have been
overpriced after a significant 23.5 pct rise of the SET Index
during the third quarter," Chan said, adding it has since gained
41 pct.
    He forecast the index could advance 30 to 40 points more by
year-end given the improving Thai economy, foreign interest in
Thai stocks and SET's average 12 pct price/earnings ratio,
which is relatively low by world standards.
    Foreign investment accounted for 1.22 billion baht, or 7.8
pct of total turnover, in the January/February period, up from
347 mln baht, or 5.8 pct, for the whole first quarter of 1986.
    Foreigners can invest in the market directly, or through
the Bangkok Fund or Thailand Fund, unit trusts set up as a
portfolio investment vehicles for foreigners.
    Bangkok Fund was set up by Merrill Lynch Capital Markets
and Cazenove and Co in 1985, while the Thailand Fund was set up
last December by Vickers da Costa International Ltd, Morgan
Stanley and Co Inc, Banque Internationale a Luxembourg, BIL
(Asia) Ltd and the World Bank's International Finance Corp.
    Each trust is capitalised at 30 mln dlrs and has invested
more than 70 pct of its funds in equities.
    Brokers said demand for Thai stocks has strengthened
criticism the market, with 2.9 billion dlrs capitalisation, is
too small and its trading narrowly based.
    Although an average 50 issues are now traded a session,
against 30 a year ago, most foreign fund managers focus on less
than 10 easily tradeable blue chips. Yothin said investors do
not seem interested in smaller or speculative issues.
    Long-term investment in SET is also restricted by laws
limiting foreign-held equity in most listed companies.
    Foreign equity is limited to a maximum 25 pct in banks and
is also the self-imposed limit in popular Siam Cement. Most
other businesses have a 49 pct limit.
    SET officials said foreign investment in blue chips has
reached a limit and the barrier will likely slow investment as
fund managers are reluctant to buy smaller issues.
    SET President Maruay Phadungsith said his priority is to
list more stocks this year and is waiting for government
approval to launch a second trading board, where less
diversified companies with short track records can be listed.
    SET hopes to list 10 new issues this year against only one
in 1986.
    SET officials added state enterprises that have delayed
plans to go public are missing a golden opportunity to attract
capital through the exchange as their shares would be popular.
    A plan for state-owned Thai Airways International Ltd and
Bangchak Petroleum Co Ltd to go public this year appears less
certain because of opposition from their administrations.
    The privatisation of Krung Thai Bank Ltd has also been put
in doubt by a Finance Ministry decision this month to merge it
with ailing government-owned Sayam Bank Ltd.
 REUTER
