Business sentiment hits 2-year high, stock market optimism

Stronger manufacturing and exports buoyed confidence in the economy and drove the Business Sentiment Index to a two-year high in March, according to the Bank of Thailand, as American financial publisher Barrons said there is still plenty of opportunities for growth in the Thai stock market despite recent cooling down after last year’s sizzling performance.

A 22 percent rise in the Stock Exchange of Thailand (SET) in 2016 thrilled investors and was second in Asia only to Pakistan, which Barrons described as a frontier market. While the SET often does not garner the attention of some larger markets, over time it has actually been providing superior returns.

“The key driver (in the SET’s rise) was a spectacular 33 percent rebound in corporate earnings – by far the fastest in the region. The Bangkok bourse has given investors 11.2 percent annualized returns over the past 10 years, including reinvested dividends, better than China or India,’’ Barrons wrote.

Since the start of 2017, however, the pace of the SET’s rise has slowed, with shares up an average of only 4.7 percent, while Hong Kong’s bourse has raced ahead at 10 percent, with India nipping at its heels at 9 percent.

Nonetheless, Barrons remained bullish on the Bangkok bourse, noting that the price-to-earnings ratio for most Thai stocks are still among the most attractive in Asia, creating the strong potential for higher increases to re-emerge.

“There is still a lot of juice left in the market,” Barrons wrote. “Thai corporate earnings growth is forecast at over 9 percent this year and 12 percent next.”

Barrons also quoted Manu Bhaskaran, an economist at Centennial Group in Singapore, as saying “The Thai economy is improving as exports pick up and farm incomes rebound with the revival of commodity prices. The government is ramping up public infrastructure spending, and there are signs that foreign direct investments are picking up, with a surge in applications.”

With stronger local sentiment, however, private investment has also started to pick up. Business sentiment hit a 24-month high in March, according to the Bank of Thailand business sentiment index.

“The higher index was the result of improved confidence in the manufacturing sector, particularly exporters in the paper and printing, machinery production and automobile sectors,” the central bank said in a statement.

The central bank added that improved sentiment was in line with growth in merchandise exports anda temporary acceleration in production ahead of the long Songkran (Thai New Year) holiday in mid-April.