Given that the market has begun to waver around the 1,200 point over the past week and with foreign fund flows slowing slightly we have to ask, should the SET Index continue to be so bullish? Brokerage houses are now upping their targets for the SET Index this year, others are starting to place targets for next year.
Economically I’m not worried for Thailand, it has:
1. A recovery from last year’s floods
2. The upcoming AEC integration is only going to be fantastic for the entire ASEAN region and Thailand should be one of the countries next to Singapore that will benefit massively.
3. Myanmar opening up next door, new market, plenty of resources Thai companies should be able to leverage off its proximity to Myanmar.
4. We still have low interest rates, perhaps not stupidly low as Europe and the US but still low.
5. Corporate tax cuts this year and next, increased minimum wage for University graduates starting next week.
1. Valuations are stretched, each industry/sector is now trading at mid-teen PE’s
2. Dividend yields are equivalent to the 10 year Thai Government Bond rate.
3. Politics politics politics.
These are interesting times, I’m cautious at these levels but still comfortable as there are still several strong companies that are cheap with strong business models and catalysts for their stock price movements.