WITH fast changing world economic and political environments following the emergence of Donald Trump as the new president of the US, experts at Tisco Securities stated investing in the stock markets will remain a good choice at least this and next year.
Paiboon Nalintharangkurn, Chief Executive Office at Tisco Securities told the Tisco Wealth Investment Forum held at the Stock Exchange of Thailand recently of the trend, saying stock investment in the emerging markets including Thailand will remain a good choice for investment.
Speaking on the topic “Global Economic Challenge in 2017” he pointed out that since the world economic crisis in 2009, equity has been the most rewarding.
“If you bought shares and just held onto what you bought, the average gain would be around 27% per year. So you may ask if the price of shares on the SET is already too expensive as last year alone the Thai market saw around 20% gain, which is one of the world’s best performers.”
He pointed out that compared to the price/equity or PE ratio of around 15 in the developed market at the moment, the emerging market’s PE of around 10 is still okay. And compared to the interest rate, the price of stocks in the emerging markets is still cheap as the gap between the equity rate of return and the interest rate is still around 4%.
With the Federal Reserve of the US and central banks in Japan, UK and EU doing what you call quantitative easing (QE) by printing money into the market, their amount of injection has risen from five trillion dollars in 2009 to 17 trillion dollars at the moment. Most of the money has gone into the bond market while the remaining much smaller sum went into the equity market causing the stock market to be bullish worldwide since then.
Now that the US has decided to stop QE operation and the Fed started to increase interest rate, making investing in the bond market less attractive, what’s happening is that money has started to move from the bond market into the equity market and is expected do so during the next few years.
With many including the IMF forecasting that the world economy has already bottomed out since last year, the recovery this and next year is expected to be relatively slow, meaning the interest rate rise will also be not much as well and that will be a boon for the equity market.
What about inflation? He said before Mr Trump came, there had been a worry about deflation but now with Mr Trump trying to do as promised, people have started to worry about inflation. But since the economic recovery will not be quick, interest rate increase will be slow as well.
At the same time, he said oil price, which has bottomed out last year and starting to rise to around 50 dollars per barrel at the moment and may cause prices of other commodities to rise which therefore could push up inflation and interest rates, is expected to be in the range of 50-60 US dollars per barrel.
That, and production capacity as well as wage, are unlikely be a problem.
And with the world and Thai economy growing this and next year, the earning per share for the Thai market will remain attractive. The Thai stock market will look good for at least two years, he concluded.
Top: The bull market will likely keep going for at least this and next year. Photo: Thetaxhaven (CC-BY-2.0)
By Kowit Sanandang