January 13, 2014 / 5:31 AM / 4 years ago

Thai stocks dip amid political unrest, but foreign demand persists

BANGKOK, Jan 13 (Reuters) - Thailand’s share market slipped on Monday as anti-government protesters say they will bring the capital to a halt and economists have slashed their GDP forecasts for 2014 after two months of political unrest.

Foreigners, however, are still been buying Thai stocks, with the bourse seeing foreign inflows in almost every session since the start of the year.

The buying has not been heavy, but it shows an appetite for the large caps that feature in Thai equity portfolios, which look undervalued after falls in 2013.

As of Friday, the Stock Exchange of Thailand had logged net foreign inflows of $90 million so far this year, according to Thomson Reuters and stock exchange data.

Citigroup analyst Kritapas Siripassorn wrote in a ‘Thailand Strategy’ report that valuation multiples for Thai shares looked low compared with historical levels.

“Despite negative headlines on politics that could lead to another year of a lacklustre economy, we remain positive over the medium term and would use the opportunity to buy into names that are trading at a discount to their valuation range while we continue to see earnings capability over the medium term.”

The top 50 large caps trade at a forward price-to-earnings multiple of 11.13 versus Indonesia’s 12.53, Singapore’s 13.51, Malaysia’s 16.01 and the Philippines’ 16.47, Thomson Reuters data showed.

The Thai market was Southeast Asia’s worst performer in 2013, with a drop of almost 7 percent.

The protests took off at the start of November and foreigners sold a net $2.8 billion in the last two months of 2013, taking full-year sales to $6.2 billion.

Worries about the U.S. Federal Reserve’s winding-down of its economic stimulus programme caused funds to flow out from the middle of last year. The protests, and the economic weakness it may trigger, added to the gloom, causing the SET index to fall nearly 13 percent from November, underperforming the rest of Asia.

On Monday, the Thai index fell 0.6 percent by 0500 GMT, whereas most other Southeast Asian markets rose after surprisingly weak U.S. jobs numbers revived speculation the Federal Reserve could keep policy loose for longer.

The baht has fallen 6 percent since the start of November but has steadied around 33 per dollar in recent days.

Some fund managers remain hesitant about Thai assets, with a caretaker government having only limited authority to act to offset economic weakness and the chances of an election being held on the announced date of Feb. 2 looking doubtful.

Jintana Mekintharanggur, head of equities funds at Manulife Asset Management (Thailand), prefers stocks that are linked to the global recovery.

“It’s still not clear which way the market will go in the short term as the political outcome is still hard to predict. But we look at companies that will benefit from the global economy for our stock picking,” she said.

Nomura analyst Nithi Wanikpun expected the market to remain subdued in the first half before picking up in the second -providing there are political reforms and an election is held.

“We believe the recent rally in the SET is more of a ‘dead cat bounce’ than a sustainable recovery,” he wrote in a report. (Editing by Alan Raybould and Jacqueline Wong)

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