BANGKOK: Thai stocks were among the best-performing in Asia last year. Only Pakistan, a frontier market which was up 48%, bested the 22% rise in Bangkok’s benchmark SET Index. The key driver was a spectacular 33% rebound in corporate earnings—by far the fastest in the region. The Bangkok bourse has given investors 11.2% annualized returns over the past 10 years, including reinvested dividends, better than China or India. But investors looking for an encore this year have been disappointed. Since January, Thai stocks are up just 4.7%, compared with an 10% upside for Hong Kong and 9% for India.
Yet there is still a lot of juice left in the market. Thai stocks, which trade at 14.5 times this year’s earnings, are still fairly priced. Indonesian stocks trade at 15.8 times this year’s earnings, while Malaysia trades at over 17.5 times and the Philippines at 18.3 times. Only Korean stocks, which traditionally sell at a discount to the rest of the region, are substantially cheaper, at 10 times earnings. Thai corporate earnings growth is forecast at over 9% this year and 12% next. After a dramatic slump in 2014 and 2015, gross domestic product grew 3.2% in 2016 and is expected to advance another 3.6% this year. With inflation low, the Bank of Thailand kept benchmark interest rates unchanged at 1.5% last week.
“The Thai economy is improving as exports pick up and farm incomes rebound with the revival of commodity prices,” says Manu Bhaskaran, an economist at Centennial Group in Singapore. “The government is ramping up public infrastructure spending, and there are signs that foreign direct investments are picking up, with a surge in applications, even as private investment remains weak.” Thailand’s recovery should focus on infrastructure and consumer products. Some $51 billion of transport infrastructure projects have just been approved, and Bangkok is extending its subway lines. Construction activity is likely to grow 15% this year and next, compared with an average of less than 10% in recent years. Railway infrastructure is rapidly opening access to the rural heartland, which is helping to increase urbanization and boost consumption.
