The SET index was expected to hit 1,750 by year-end, a potential 15 percent upside and reflecting a forward price-to-book ratio of 2.3 times, said Prinn Panitchpakdi, country head of CLSA Securities (Thailand) Ltd.
"We believe the new investment cycle, especially in public infrastructure investment, will happen. The government has no choice but to inject a kind of catalyst or stimulus to the economy," said Prinn.
The military government has earmarked 1.9 trillion baht ($57.84 billion) for infrastructure projects for 2015-2022.
The index rose 0.5 percent to 1,527.94 on Thursday after the Bank of Thailand cut interest rates for a second straight month on Wednesday to boost the economy.
Prinn expects another 25 basis point rate cut in August, noting the broader impact of stronger public investment will not really kick in until next year.
With more policy easing expected, CLSA forecast a further weakening of the baht to 33.75 baht per dollar by end-2015 as authorities look to cool the currency's strength, which is weighing on exports.
"Regionals are all cutting rates. They are all weakening their currencies. We are in an Olympic gold medal race for pump priming. Everyone is playing it," he said.
The broker's top picks include banking shares and property developers such as Krung Thai Bank, Bangkok Bank, Tisco Financial Group, Land & Houses and AP Thailand.
"We believe the structural cycle is coming back and KTB and BBL will get the most chunk of that infrasturture lending. Tisco is our top pick and the reason is we prefer small banks as they benefit more in the near term from the rate cut," he said.
CLSA expects the Thai economy to grow 3.5 percent this year, with average growth in earnings per share of listed firms projected at 15-17 percent.
"Our GDP forecast may look higher than others but I think it's achievable. Exports have passed the worst," he said.
The central bank said recently the economy likely shrank in the first quarter but expected activity to pick up from April.
CLSA has an 'overweight' position on equities in Thailand, Indonesia and the Philippines, and is "underweight" Singapore and Malaysia.
With the economy struggling to gain traction, foreign investor interest in Thai stocks has been weak. Foreign investors sold a net $10 million so far in 2015 versus net inflows of $1.3 billion for Indonesia and $622 million for the Philippines.
They sold $1.1 billion worth of Thai shares last year.
"The government needs to show a clearer timeline of its plan because foreign investors have choices and at the moment, there are more attractive asset classes and more attractive markets to go to, namely Hong Kong and China," Prinn said.
source: www.abs-cbnnews.com
