Thai stock market to attract more foreign funds

THAILAND’S stock market has been one of the world’s best performers during the first half of this year, the first quarter in particular, and is expected to remain so in the years to come as foreign funds will continue to find the Thai market attractive.

Over 100,000 million baht in foreign funds have been flowing into the Stock Exchange of Thailand (SET) since the beginning of this year.  This phenomenon has been viewed as a crucial turnaround because during the past three years around 400,000 million baht flew away from the market.

The return of the funds this year has been seen by many as just the beginning because mostly passive funds have come in while major funds have yet to start investing here due to their own rules allowing them to only invest in democratically-governed countries.  So once Thailand again holds election at the end of next year or early 2018, more funds are expected.

But the inflows of foreign funds are due to a more important reason—Thailand is to invest heavily on its infrastructure during the next seven years.  Thailand has not made any major investment in its infrastructure since the end of the Prem Tinsulanond government nearly two decades ago. Thailand’s economic growth those days had been impressive with the government investing heavily in the deep sea port and industrial infrastructure in the Eastern seaboard.

There has been no major investment since the country suffered the Tom Yum Kung crisis in 1997 except for the Airport Rail Link, which has not linked airports so far.

Certainly, with major investment in the infrastructure, the country’s economy will prosper and naturally so will the Thai stock market as evidenced in the past when the SET index peaked at around 1700 in 1994.

The big step forward for Thailand this time around is strengthening its transport and logistics by expanding its railways, highways and other core infrastructure in the coming years, aiming to make itself more appealing to investors by lowering logistics costs.

It plans to spend up to 1.8 trillion baht ($50.8 billion) on 20 major infrastructure projects by 2022. Bidding will be completed by the end of 2017, with construction to begin soon after.

Railway projects form the core of the action plan, accounting for 14 of the projects planned.

Aside from the main reason that Thailand is investing heavily on its infrastructure in order to become the ASEAN Economic Community (AEC) hub, liquidity flooding the world is another reason.  With major countries like the US, Japan and EU continuing to adopt quantitative easing (QE) monetary policy to stimulate economic growth, Thailand as well as Indonesia and the Philippines are expected to be among attractive destinations for those funds in the near term.

But a warning was issued by Investment Strategist Wiwan Tharahirunchote, CFP that there might be a major hiccup in the fund flows as she foresaw Japan might stop its QE in the near future because the operation has failed to stimulate economic growth. So, if that really happens, stock markets could be affected by the shock waves and the Thai stock market is no exception.


TOP: Charging Bull, which is sometimes referred to as the Wall Street Bull or the Bowling Green Bull, is a bronze sculpture, originally guerrilla art, by Arturo Di Modica that stands in Bowling Green Park in the Financial District in Manhattan, New York City. Photo: Sam Valadi, CC-By-2.0

By Kowit Sanandang


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