A $44 Billion Manager Says Record Thai Rally Faces Growth Hurdle

(Bloomberg) -- A rally in Thailand’s stocks to a record may trip up on a comparatively moderate pace of economic expansion that threatens to cool foreign-investor interest, according to the nation’s second-biggest private money manager.

This year’s domestic economic growth forecast of about 4 percent is slower than many other developing markets in Asia, said Vasin Vanichvoranun, who manages around $44 billion as executive chairman at Kasikorn Asset Management Co. The outlook has probably dented international investors’ appetite for Thai equities relative to other Asian countries, he said.

“Investors should adopt very high caution as domestic equities have probably rallied too fast,” Vasin said in an interview Monday. “Foreign investors are still on the sidelines, while optimism on corporate earnings may be overdone given the slow pace of economic recovery.”

Kasikorn Asset joins Credit Suisse Group AG in flagging concern about valuations of Thailand’s equities following recent gains. Credit Suisse last week cut its rating on Thai stocks to underweight from neutral, citing expensive valuations and concern about economic expansion ahead of a possible general election.

Prime Minister Prayuth Chan-Ocha, the leader of Thailand’s military government who seized power in a coup in 2014, has said a general election will be held in November. Previous timelines for a return to democracy have slipped.

The benchmark SET Index has gained 4 percent so far this year and reached a record 1,828.88 last week. The advance extends a 14 percent rally in 2017 and a 20 percent jump in 2016.

But international investors have so far this month sold a net $164 million of Thai equities, the only outflows in a basket of Asian markets tracked by Bloomberg. The foreign selloff is set to extend for a fourth month, according to data compiled by Bloomberg.

Thailand’s equity gauge trades at 16.5 times blended forward 12-month earnings, the highest ratio in data compiled by Bloomberg going back to 2005. The country is among the four most expensive Asian markets, according to Credit Suisse.

Kasikorn Asset’s other recommendations are:

  • Increase equity holdings in China and India
  • Add exposure to alternative securities such as REITs for stable returns and protection from equity volatility

Vasin said Kasikorn Asset aims to more than double the growth rate of assets under management to at least 10 percent in 2018 from 4 percent last year.

©2018 Bloomberg L.P.

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