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ECONOMY & INVESTING
NINA SUEBSUKCHAROEN
L``If [the SET] goes down to 720 points it's a good opportunity for long-term investment,'' says Dr Anusorn. |
Thailand's economic performance depends on how the current political crisis pans out, and the Thai stock market may yet to reach its nadir, according to Dr Anusorn Tamajai, dean of Rangsit University's Faculty of Economics.
If the Samak Sundaravej government remains in power, or if any political changes were made within a framework of democracy, the overall market would not be significantly affected for the long run.
But another coup would severely affect sentiment, Dr Anusorn warned.
''The economic impact will be strong and this will affect the stock market. September 19 [2006] should be the country's last coup,'' he said.
Negative market sentiment notwithstanding, he said that the fundamentals of the Thai economy remain relatively strong. However, pressure on prices is rising with inflation averaging 5.8% over the first five months of the year.
''It is unlikely that the average annual inflation rate will reach double digits but it is possible that this rate will spike to two digits during some months from now to year-end,'' Dr Anusorn said.
But this in turn depends on part on the baht, as a weaker baht would raise the cost of imports and inflation.
The May trade account swung sharply back into surplus at $1.294 billion, a sharp turnaround from a deficit of $1.81 billion the previous month.
But foreign investors have been net sellers of up to 40 billion baht worth of securities over the past several weeks, a factor that has increased pressure on the baht to depreciate.
In any case, Dr Anusorn said that political risk is Thailand's biggest problem right now, with inflation and the slowing economy both manageable.
''Political risk makes investment decisions very uncertain while also affecting consumer confidence,'' he said.
Measures to accelerate infrastructure megaproject investments and raise civil servants' salaries would bolster economic growth this year. But he said growth was expected to slow over the next few months, affecting listed companies' earnings growth.
''If stock prices drop further from today's level they can be considered cheap and suitable for investment. If [the SET] goes down to 720 points it's a good opportunity for long-term investment. People should wait until it reaches that point _ 700 to 720 points, around there. I think there will be an opportunity but I don't know what's going to happen tomorrow,'' he said.
Good selections would energy and agricultural export stocks plus construction companies that are likely to get megaproject contracts. ''Try to look for stocks that give high dividends _ it's better to be safe and not too flashy and at the very least get dividends even if the stock price doesn't rise.''
The property sector might not be as bright as it should be for two reasons. One reason is that construction prices have risen and secondly interest rates are rising.
Dr Anusorn expects property companies to earn lower profit margins because they cannot increase their prices substantially even though construction materials are more costly. ''If they jack up the price too high people won't buy. The higher interest rates push up monthly installments and people won't dare to buy expensive homes.''
This is despite the fact that property in big cities should perform well but in Thailand's case the political situation is a major setback.
''People have analysed that some issues are actually a country risk rather than a political risk because as they see this round of political crisis as a structural conflict.''
Dr Anusorn expects this crisis to be prolonged as structural conflicts don't end in one to two or even six months. ''It's going to be longer than that.''
It is imperative that the country shows the world that its courts and justice system are indeed just.
''We have to show clearly we uphold the rule of law, if we don't uphold this then the country will face difficulty, definitely difficult because some people will lose confidence in the country.''
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