Large fund inflows to return

Foreign investors will play a crucial role in determining the movement of the SET Index over the remainder of the year and, if they become more positive about the state of the global economy, large capital inflows can be expected, the head of the bourse said yesterday.

The Stock Exchange of Thailand has become the most liquid bourse in Southeast Asia with average daily trading of about US$1 billion (Bt31.7 billion), said its president, Charumporn Chotikasathien.

The SET has outperformed the Singapore exchange, which used to be the champion in terms of liquidity, he told a news conference.

He said the movement of the SET Index in the current second half of the year would depend on whether global investors changed their views on where to put their money.

They are currently risk-averse and have reduced their investment in global equity and allocated more funds to safe-haven assets such as US government bonds.

"If they return to global equity markets, fund flows into Thailand are expected to increase substantially," he added.

Globally, the SET Index' growth rate between December 31 and June 30 was ranked third, after the exchanges in Vietnam and the Philippines, Charumporn said.

During the period, the SET reached 1,172.11 points, up 14.32 per cent, compared with the Vietnamese exchange's 20.15-per-cent rise and the Philippines bourse's 20-per-cent advance.

Charumporn said the Thai stock exchange would exceed the target of new market capitalisation of Bt120 billion for this year. In the first half, additional market cap was Bt44.68 billion.

The capitalisation of the SET at the end of June was worth Bt9.71 trillion and that of the second-tier exchange, the Market for Alternative Investment, Bt81.75 billion.

He said the second half would be boosted by initial public offerings by new listings, besides which there are infrastructure funds and real-estate investment trusts in the pipeline.

He also expects fund-raising via the stock market will exceed the target of Bt75 billion for the full year. From January to June, 114 companies had raised combined funds worth Bt60.49 billion.

Moreover, the facility for cross-border stock trading linked with other Asean countries is expected to be completed by the end of the current third quarter. Local investors will then be able to trade shares registered in the Malaysian and Singaporean stock markets, he said.

Virathai Santipropop, vice president of the SET, said stock prices had increased steadily in the first quarter of the year before turning volatile in the second three months, as investors became concerned about the sovereign-debt crisis in Europe and high unemployment in the United States.

The government's stimulus measures are expected to drive economic expansion amid concern over lower export growth, he said.

"The average share price was not that high, as the price-to-earnings ratio of the SET was 12.21 times at the end of the second quarter," Virathai said. The P/E ratio stood at 11.98 times at the same time last year.