Thailand’s SET May Rise to 550 by End-2009, Citi Says

By Chen Shiyin

Jan. 15 (Bloomberg) -- Thailand’s SET Index may climb 25 percent by the end of the year because of government measures to bolster the nation’s slowing economy and attractive valuations, according to Citigroup Inc.

The brokerage forecast the benchmark index to climb to 550, 25 percent higher than yesterday’s close, Suchart Techaposai, Citigroup’s Bangkok-based head of research, wrote in a report. Easing political tensions in the nation will also help boost consumer sentiment and business confidence, the analyst said.

The SET Index dropped 48 percent last year, the biggest slump in 11 years, as street protests helped topple the government and the global credit crisis worsened. The measure, which climbed 1.3 percent yesterday after the central bank slashed interest rates more than economists expected, fell 3.4 percent to 424.66 at 11:44 a.m. local time today, compared with the 3.8 percent drop of the MSCI AC Asia Pacific Index.

“Low oil prices, huge saving pools at both the macro and household levels, low corporate debt, limited investment excesses, and strong banking balance sheets will allow Thailand’s economy to effectively respond to the low interest- rate policy,” Suchart wrote in the report.

Prime Minister Abhisit Vejjajiva, elected by parliament last month, plans to spend 300 billion baht ($8.6 billion) on public works, farm subsidies and cheap loans to counter the slump in Southeast Asia’s second-largest economy.

Interest Rate Cut

The Bank of Thailand yesterday lowered its one-day bond repurchase rate by three-quarters of a percentage point to 2 percent. The decision was expected by four of 19 economists in a Bloomberg News survey.

Gross domestic product probably shrank in the fourth quarter as a global recession and the closure of Bangkok airports hurt trade and tourism, the finance ministry has said. Growth this year will probably be the slowest since a recession in 1998, the government said.

Investors should buy Bangkok Bank Pcl, Kasikornbank Pcl and Siam Commercial Bank Pcl, the nation’s three largest banks by market value, because the companies will benefit from expansion in the nation’s economy, the Citigroup analyst said.

The brokerage also favors shares of Advanced Info Service Pcl, Land and Houses Pcl and L.P.N. Development Pcl, according to the report.

Kasikorn Asset Management Co., the country’s second-biggest mutual fund company that manages about 250 billion baht, last week said it expects the SET to rise to 600. The estimate was also based on increased government spending and ahead of yesterday’s rate cut.

After last year’s decline, the SET is now valued at 7.15 times reported earnings, the lowest in Asia after Singapore and Pakistan, according to data compiled by Bloomberg.

“Compelling valuations reflect excessive bearish sentiment relative to macro fundamentals,” Suchart wrote. “Once growth unfolds, though weaker, it will arguably be better than what is currently priced in by the market.”

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net.