Bangkok--18 Dec--Aberdeen Asset Management
Aberdeen Asset Management Company Thailand Ltd (‘Aberdeen’) says despite a still sluggish global economy it sees brighter prospects for 2014. According to the fund manager, Asia overall has been facing a mild cyclical slowdown but there are signs now of a more concerted recovery in the US and muted growth in Europe.
Thai exports should be among the first to gain. Aberdeen sees these growing by 7% in 2014 from a flat situation at present. This should compensate for slower domestic growth, led by a slowdown in credit after a two-year consumer lending boom. Foreign direct investment and tourism, meanwhile, which contribute to 3-5% and 10% of GDP respectively, have stayed buoyant.
But for another year of 3-3.5% growth or more, much will depend on whether the recent House dissolution will diffuse tensions. Provided properly contested elections do go ahead, Aberdeen says the market can stabilise and, at current levels, an expected growth in market earnings of around 10% provides support. This follows recent foreign-led profit-taking in recent months, which has left the SET some 16% below its high of 1,643 achieved in May.
Pongtharin Sapayanon, head of fixed income Thailand, comments:
“Thailand’s economy has several points in its favour: the region is emerging gradually from a weaker patch, helped by China, improving demand in the US and regional trade initiatives. Structural underpinnings in terms of reserves, terms of trade and external balances are still sound. From a fixed income perspective, technical factors in the form of falling levels of foreign ownership of Thai sovereigns, means valuations are attractive, plus the currency may have found a floor. A muted inflation outlook further supports the asset class.”
Adithep Vanabriksha, Chief Investment Officer, adds:
“We believe that stocks are fairly valued now, with the SET on a forward value of 13.3x forward price/earnings. Of course, we have heard a lot about tapering risks, and these remain in the form of potential price volatility amid disruptive fund flows. But if earnings start to improve, the stock market will be more resilient. Dividend backing is good and corporate balance sheets look solid enough. We expect exports to lead an uptick in growth, with public works – if they still go ahead – helping the domestic economy. Where data is softer on private spending. Household debt levels have crept up. The main worry otherwise is politics. It is not our base case but any escalation in the current tensions could lead to a deferral of investment, erode foreign confidence and stall growth.”
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