(Updates with the stock index in seventh paragraph.)
June 16 (Bloomberg) -- Thailand’s benchmark index, the second-worst performer among Asia’s major markets this month, may rise about 19 percent in the second half as the government accelerates spending to meet policy pledges made in the run-up to elections on July 3, according to Kasikorn Securities Co.
The SET Index may climb to 1,250 in the fourth quarter, Kavee Chukitkasem, an analyst at Kasikorn Securities, said in a phone interview. Investors should start “accumulating” shares in banks and developers on the prospect of slower inflation and interest-rate increases in the second half, he said.
“Cash will probably flood the domestic economy following the general election as the new government will speed up the implementation of the populist policies to please its supporters,” said Kavee. “All political parties have similar campaigns with more spending to spur economic growth.”
The SET has lost 4.1 percent in June through yesterday as overseas investors withdrew $648 million from Thai shares amid concerns the election will revive political tension. The drop was the most after Hong Kong’s Hang Seng Index among Asia’s 12 largest markets. Goldman Sachs Group Inc. and Credit Suisse Group AG advised investors this month to reduce holdings.
Prime Minister Abhisit Vejjajiva’s Democrat party faces opposition from the Pheu Thai party, led by the sister of Thailand’s former leader Thaksin Shinawatra. Thaksin was ousted in a 2006 coup and has lived abroad since fleeing a jail sentence for abuse of power three years ago. Demonstrations against Abhisit’s government last year left more than 90 dead.
The benchmark stock index dropped 1 percent to 1,019.69 as of 11:51 a.m. local time, extending its loss this quarter to 2.7 percent. The gauge is set to snap eight straight quarterly gains, the longest winning streak since Bloomberg began collecting the data in 1987.
Abhisit’s party has pledged to guarantee farmers’ incomes, raise the minimum wage 25 percent and offer two-year interest- free mortgages for first-time home buyers. The Democrat party also vowed to spend 170 billion baht ($5.6 billion) over the next five years to improve the country’s irrigation system, Finance Minister Korn Chatikavanij said yesterday.
Pheu Thai plans to give credit cards to farmers, mandate starting salaries for new graduates and increase tax allowance for new home purchases.
Kavee joined Mark Mobius in favoring Thai equities even as Goldman and Credit Suisse advised cutting holdings. Mobius, who oversees about $50 billion as the Singapore-based executive chairman of Templeton Emerging Markets Group, said in e-mailed comments on June 9 the periods of political turmoil haven’t caused “long-term” selling of Thai stocks because investors have become accustomed to the conflict.
“Politics will remain the biggest concern among investors, especially foreigners,” said Kavee. “Still, it’s unlikely there would be any worse political turmoil than what the nation suffered last year.”
The outperformance of Thai stocks is probably ending as the economy slows, inflation accelerates and political risk deters investors, according to Timothy Moe, a Hong Kong-based strategist at New York-based Goldman Sachs. Moe recommended boosting holdings in Malaysia and Indonesia in a June 7 research report.
Thailand’s banks, property companies and tourism-related stocks are most vulnerable to revived concerns over politics, Dan Fineman, an analyst at Zurich-based Credit Suisse, wrote in a research note. Political instability has cost the country between 1 and 2 percentage points of annual gross domestic product growth, according to Credit Suisse estimates.
Fineman and Kavee were jointly ranked first for Thai strategy in the latest survey by the Securities Analysts Association, a Bangkok-based equity analysts group.
Kavee recommended in February investors trim holdings in property developers and banks, citing slowing economic growth and rising interest rates. He had advised investors to buy hospital, media and tourism companies.
The SET Banking Index has lost 3.3 percent this year, while a gauge of property developers has declined 2.4 percent. The SET Health Care Service Index, a measure of hospital operators, has gained 14 percent in 2011, the third-best performing industry group on the benchmark index. Gauges tracking median companies and hotel operators also gained.
For the second half, easing inflation and a slower increase in borrowing costs will encourage consumers to spend, raising demand for new loans and residential properties, Kavee said yesterday. Kasikorn Securities is a unit of Kasikornbank Pcl, the nation’s third-biggest lender.
His top picks include Bangkok Dusit Medical Services Pcl, the nation’s biggest private hospital operator, and Minor International Pcl, which runs the largest hotel and fast-food chains. He also favors Pruksa Real Estate Pcl, the No. 1 residential property developer by sales.
--Editors: Shiyin Chen, Matthew Oakley
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