Thai Vote Can Reverse $1.7 Billion SET Exodus, CIMB Says

(Bloomberg) -- A firm date for the return of democracy in Thailand would help bring foreign investors back to its stock market, CIMB Securities (Thailand) Co. said, after the bourse suffered the largest net outflow this year in Asia excluding Japan.

Clarity in the timeline for a vote should help to ease concern over political risk, said Kasem Prunratanamala, head of research at CIMB Securities in Bangkok. A stronger economic recovery and stable monetary policy are poised to support the benchmark SET index, he added.

Election uncertainty undermines foreign interest in Thai equities but "overseas investors probably don’t have many Thai stocks left to sell," said Kasem.

Foreign funds have pulled out a net $1.7 billion from the Thai stock market this year, while pumping $3 billion into bonds in part to take advantage of a surge in the baht.

The military government headed by Prime Minister Prayuth Chan-Ocha has repeatedly pushed back the timeline for a vote since taking power in a coup in 2014 after a prolonged period of unrest. The latest schedule for a poll by February next year remains tentative because of wrangling over necessary election laws.

The benchmark SET Index has gained 2.9 percent in 2018 on domestic buying after an acceleration in economic expansion last year supported local sentiment. The rally fizzled in recent days.

Still, earnings surprises by oil and gas stocks as well as telecommunications companies prompted CIMB to raise its target for the equities’ gauge to 1,985 from 1,875, according to a note to investors from Kasem dated Tuesday. That implies a 10 percent gain from Tuesday’s close.

Prayuth’s administration has cut red tape and sought to speed up major infrastructure projects to bolster the economy. At the same time, private investment is moderating and consumer confidence dipped last month amid the delay in the return to democracy. Overall expansion lags behind neighbors such as Indonesia and Vietnam.

--With assistance from Lee Miller

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Margo Towie, Sunil Jagtiani

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