Bangkok--11 Jun--Master Mind Communication
Key Highlights:
- ING Funds Thailand forecasts that global growth will be anaemic in the second half of 2012 due to slow recovery in the US and a prolonged EU sovereign debt crisis
- Growth in Asia and Emerging markets will continue outperform developed economies
- Thai Economic growth in the second half of 2012 will remain strong, however external factors in the US and EU are key risks that need to be monitored
- The Thai equity market remains one to most attractive markets in the world, as earnings momentum continue improve and net profit for 2012 is expected to be as high as 27%
- Thai equity market valuations also remain attractive on a regional basis.
“Despite volatility in global markets as a result of external factors in Europe and the US, the outlook for Thai equities markets remains positive and strong for the second half of 2012” Mr.Monrat Phadungsit, Chief Investment Officer, ING Funds (Thailand) Co.,Ltd. said.
According to IMF estimates, Global the global economy is expected to grow by 3.5% in 2012 and 4.1% in 2013, at this rate the global economy is expected to muddle through the European debt crisis; however, at this rate global growth will be anaemic compared to other periods. Despite a gradual recovery in the global economy, emerging Asia economies growth will remain stronger and outperform other regions and this is where investment opportunities exist he added. This is due to stronger and solid economic fundamentals in Asia coupled with accommodate fiscal and monetary policies that help sustain overall higher growth rates, Mr.Monrat said.
The issues challenging European and US economies and government are structural problems in nature and take time to solve, thus; resulting in much civil discontent and also affecting government stability and legitimacy in developed economies, these issues include high employment, high government debt to GDP levels, fiscal deficits, and loss of competitiveness. As a result it is difficult to sustain similar growth rate in these countries as in the past. The impact of slower economic growth in the EU is also having a negative impact on China and in particular Chinese exports, Mr.Monrat added thereby it is anticipated to the Chinese government is expected to further loosen monetary policy and implement additional fiscal stimulus measures in the near term to help maintain its target growth rate at roughly 7.5% to 8.5% in 2012.
Although there are certain key external risks in the EU and US that need to be constantly monitored in the near term, the endgame or outcome should remain cautiously positive, eventually EU leaders are expected to workout on further bailout/rescue funds or additional stimulus measures for troubled economies such and Greece and Spain in the longer term, assist troubled banks in the region through additional liquidity or capital support and further implement austerity programs that put the economies of trouble countries back in order. The devil is in working out the details of the various packages, however, if there is more clarity on the direction and details of the programs, then markets should recover quickly, he added. Nevertheless, in the near term it is possible that markets remain quite volatile to news flow from Europe and if the there is no clear policy action from EU government and the ECB then there is a change that markets could deteriorate further. On the US economy as key economic indicators start to deteriorate, there is more change of additional Quantitative Easing measures (QE3) or additional
In term of Thai equities markets, the correction as a result of external issues, presents a clear opportunity to invest. Thailand economic fundamentals remain strong and recovery after last year floods has been rapid, driven by both government policy initiatives such as raising the minimum wage rate, reducing corporate income tax, infrastructure spending on flood prevention and improving mass transit and private sector initiatives in post reconstruction efforts. As a result official government estimates from the Bank of Thailand and the Ministry of Finance expect the economy to grow at in a range of 5.5% to 6% in 2012 (May 2012), higher than most growth rates in Asia due to increased public and private led consumption. This is effect will increase earnings visibility of publicly listed companies in the Thai Stock Exchange and as a result market consensus expect net earning per share of listed companies on the stock exchange to grow by 27% in 2012* and 14.6% in 2013* This implies a current market price to earnings level of 11.1 times which is on par which regional peers and that the Thai market despite higher average growth rates than regional peers is still not trading at a higher value or overvalued relatively.
Mr.Monrat summarized that despite uncertainties in global markets emulating form Europe, the investment outlook for Thai equities in the second half of 2012 remain bright and attractive as Thai economic fundamentals and growth prospects are strong and better than many of its regional peers. The market is expected to rebound once concerns in Europe dissipate. However since uncertainty still remains and for this reason he recommends that investors invest in both equities and fixed income as markets are still to remain volatile going forward. He recommends that investors should also consider flexibility and portfolio rebalancing as additional important factors when choosing to invest and recommends ING Thai Balance Fund and ING Thai Mixed 15/85 - Dividend Fund, which are flexible funds that limit downside risk to investor’s portfolio in times of market volatility but also take advantages of upside gain in times of economic recovery.
* Bloomberg Consensus, 8 June 2012