Traders monitor stocks at a securities firm in Thailand (Photographer: Jeremy Horner/Bloomberg) 

Bulls Start Eyeing One of the World's Top Equity Rallies

(Bloomberg) -- Thailand’s stock market is one of the world’s best performers this quarter and may climb further on surprisingly strong economic growth, according to a $44 billion fund manager.

A report Monday showed gross domestic product expanded 4.6 percent, more than many economists expected, signaling that investment and consumption will spur earnings growth, said Narongsak Plodmechai, chief executive officer of SCB Asset Management Co. in Bangkok.

"Strong economic growth should help Thai equities fend off higher volatility in global financial markets as trade tensions linger,” Narongsak said in an interview Tuesday. The benchmark SET Index may reach at least 1,800 this year, he said. That’s about 6 percent higher than Tuesday’s close.

The index has climbed 7.6 percent this quarter in dollar terms, behind only Mexico among benchmark stock indexes tracked by Bloomberg. SCB Asset Management, Thailand’s biggest private money manager, joins Morgan Stanley in turning more bullish on the Thai market, where international funds have withdrawn more money than they’ve invested each month for almost a year.

Banks, property developers and auto-part makers will be the main beneficiaries of the Thai economic recovery, Narongsak said.

Bulls Start Eyeing One of the World's Top Equity Rallies

Morgan Stanley rated Thai stocks as among its top defensive picks in Southeast Asia amid a wider emerging market rout, strategist Sean Gardiner said in a Bloomberg television interview Aug. 16.

Overseas investors have withdrawn a net $78 million from domestic equities so far in August, headed for the 11th month of outflows, according to data tracked by Bloomberg. Thai stocks are rebounding from a 10 percent slide from April through June, their worst quarter in three years.

"Foreign outflows have slowed significantly as investors have adapted to the uncertainty over tariff tension and U.S. interest rate increases,” Pakorn Peetathawatchai, president of the Stock Exchange of Thailand, said at a briefing. "Thai stocks should remain attractive as the economy will continue its strong momentum following the first quarter’s robust growth.”

But there are still risks to negotiate, including a potential rise in Thailand’s benchmark interest rate that could pose a headwind for some companies. Economic expansion and higher energy prices may fan domestic inflation, according to Narongsak.

Bank of Thailand Governor Veerathai Santiprabhob struck a hawkish tone Monday after the growth report, saying officials are waiting for the right time to consider what would be the first interest-rate hike since 2011.

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