The bright outlook for Thailand' stock market, which is supported by monetary policies and a healthy growth prospect, is balanced by high portfolio weights and above-average valuations, HSBC said in its Thailand equity strategy report.
HSBC remained 'neutral' on Thailand, saying that in terms of valuation, the market looked expensive at a 12-month price-to-earnings multiple of 12 times, a 10 percent premium to its 10-year average and 9 percent higher than the regional average.
"We think, given the growth profile, and as other ASEAN markets such as the Philippines and Indonesia are trading at much higher premiums, valuations are not yet overly expensive."
Thailand's SET index was trading up 1.2 percent at 1,549.16. It has risen 11 percent so far this year, trailing a 19.7 percent gain for the Philippines and 15.7 percent for Indonesia.
Banks, telecoms and consumer were its top sector picks and its preferred stocks were Total Access Communication Pcl, Kasikornbank Pcl and Tesco Lotus Retail Growth Freehold and Leasehold Property Fund .
HSBC said banks offered attractive valuations, with SME and consumer loans remaining key drivers of loan growth while consumer had a growth story. It noted that rice subsidies are set to provide a boost to disposable incomes until the end of this year.
1552 (0852 GMT)
(Reporting by Viparat Jantraprap in Bangkok; Editing by Jijo Jacob)