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Published on July 4, 2007

Shares rallied 3.31 per cent at one point yesterday to touch a fresh 10-and-a-half-year high on strong capital inflows buoyed by a brighter political and economic outlook.

The stellar showing saw the composite SET Index easily surpassing the intra-day high of 802 points marked under the Thaksin Shinawatra administration, and even the pre-crisis level of January 1997.

The bourse has chalked up a gain of nearly 20 per cent so far this year.

The stock market started at 797.15 and quickly shot past the 800 barrier, touching 818.98 before settling down to 813.52 at the end of trading for a 2.63-per-cent gain on the day. Turnover was brisk at Bt46.93 billion.

Foreign investors padded their portfolios with a net Bt7.83 billion in Thai stocks.

Banks and energy firms were at the centre of the buying spree. Bank of Ayudhya jumped 13.46 per cent to Bt29.50, while Kasikornbank soared 7.19 per cent to Bt82, Siam Commercial Bank climbed 6.67 per cent to Bt80 and Bangkok Bank improved 5 per cent to Bt126.

PTT Exploration and Production advanced 4.58 per cent to Bt115, and PTT accelerated 2.16 per cent to Bt284.

The Market for Alternative Investment, the secondary board, was also upbeat over a 35-month high, closing up 0.42 per cent at 234.68. The Thailand Futures Exchange marked a new milestone with 9,884 contracts.

Foreign capital inflows also drove the baht to a 10-year high against the US dollar, closing at Bt34.31-Bt34.33 onshore against Monday's Bt34.45-Bt34.48.

Sombat Narawutthichai, secretary-general of the Securities Analysts Association, said the sudden surge in stocks came as somewhat of a surprise.

Major worries including political unrest and high interest rates have eased, though.

"Risks are reduced and that's why investors have jumped on the bandwagon to pile up Thai shares. The capital inflow also gives a big boost to the Thai bourse," he said.

Foreign investors have continued their buying spree in Asian regional stock markets after European stock markets showed poor performances, an analyst at KGI Securities (Thailand) said.

Ayudhya Securities has raised its SET Index target for this year to 840 points and in the coming months might upgrade it further to 930-1,000, the target range which it had set for next year.

Kampol Adsavakulchai, executive vice president of SCB Asset Management, said the company might have to review its stock forecast for this year by taking into account the recent pick-up of the bourse.

He warned local investors that the inflow of funds might start to decelerate as foreign investors have already invested in the market here to a certain limit.

Atchana Waiquamdee, deputy governor of the Bank of Thailand, said the stronger baht could be blamed on the weakening of the dollar after the US announced worse-than-expected economic figures.

The capital inflows are also pushing up the baht. She insisted that the unit was following the regional trend, so the central bank did not have to step into the foreign-exchange market.

It is difficult to predict where the baht is heading, as that largely depends on the US dollar. A gloomy economic picture of the US would lead to a retreat from the greenback, giving momentum to Asian currencies. But the dollar would be back in favour if the world's largest economy was in better shape, she said.

Deputy Prime Minister Kosit Panpiemras ascribed the recent baht spike to a vote of confidence by foreign investors, saying funds were still flowing in undeterred by the delayed election.

"It's at a manageable level and the Bank of Thailand is in charge of this. The crisis in 1997 has given us a lesson and Thailand has the mechanisms to contain risks, particularly in managing exchange rates without running against the tide as in the past," he said.

The proposal to postpone the election should not derail the economic recovery. However, the government still wants to host the poll as soon as possible, he added.

Finance Reporters

The Nation