UOB KayHian: Investors turning more optimistic on Thailand market

Thai baht notesThai baht notes

UOB KayHian said more investors are taking an optimistic view of the Thailand stock market amid continued economic improvement.

“We met with more than 20 fund managers and did not see much of a pushback on our positive view towards the SET index’s outlook for 2019, given Thailand’s continued economic recovery and stable political situation,” the brokerage said in a note on Thursday. “However, there are concerns about potential delays in infrastructure projects and a sluggish recovery in consumption.”

UOB KayHian kept a SET index target of 1920 for 2018, pegged to 15.50 times 2018 price-to-earnings. As a base case, it forecast 9.2 percent on-year net profit growth for stocks under its coverage this year, with good earnings growth likely in the banking, industrial estate, property and commerce sectors.

The brokerage noted that the main index could be in “consolidation mode” in the near term after strong rallies near the end of 2017, but it added there was limited downside from here. It pointed to relatively low foreign ownership of the index, making it less prone to fund outflow risks.

“Our investment strategy remains focused on domestic-cyclical plays centered on government infrastructure development as well as improving domestic consumption and tourism. We also like stocks with strong earnings growth in the downstream petrochemical space,” it said.

It said its top picks were Banpu, Bangkok Bank, Central Pattana, The Erawan Group, IRPC, Kasikornbank, Minor International, Robinson Department Store, PTTGC, Siam Cement and Sino-Thai Engineering.