Heavy year-end investment yesterday in mutual funds to reap tax exemptions helped push the Stock Exchange of Thailand (SET) index to its highest level in nearly 24 years.
The SET closed at 1,732.31 points, up 0.5%, in heavy turnover worth 65.8 billion baht. The bourse edged up to 1,736.83 points at one point yesterday, the highest in almost 24 years.
The index reached an all-time high in January 1994, reaching 1,753.73 before tumbling 214.53 points during the 1997-98 Asian financial crisis.
Institutional investors were the biggest net buyers yesterday at 1.8 billion baht, followed by foreign investors at 431 million and brokerage firms at 289 million. Retail investors were sellers of 2.53 billion baht worth of shares.
The Thai rally was in line with Hong Kong's Hang Seng index, rising by 0.7%, while China's Shanghai Composite index was up 0.88%.
The SET run-up was led by purchases of large-cap equities in the energy, banking, and healthcare sectors, with names including BANPU (+5.65%), PTTEP (+1.54%), SCB (+1%), and BDMS (+3.32%).
Kasikorn Securities executive chairman Thiti Tantikulanan said equity purchases by mutual funds, namely long-term funds and retirement mutual funds, provide a short-term impetus for the SET's upward climb as those purchases are usually made around year-end.
The SET index has a year-to-date return of 12% compared with a 20-30% return on regional stock markets, said Mr Thiti.
"The bottoming out of the US economy and a good performance in the global financial system are factors supporting the bourse rising further," he said. "A correction is not expected now with higher demand for equities, but investors could embark on profit-taking or switch their positions next year."
Kasikorn Securities projects the SET to rise to 1,800 points by year-end 2018.
Thanachart Securities strategist Adisak Phupiphathirungul agreed seasonal purchases of mutual funds are driving the index upward.
"The bourse is not expected to move upward strongly going forward, although a bullish outlook still remains for next year," said Mr Adisak.
Ample liquidity in the domestic financial market, a stronger Thai GDP growth outlook, and the prolonged low-interest rate environment are factors propelling the SET's upbeat outlook in 2018, he said.
US President Donald Trump's plan to reduce both the corporate tax and personal income tax is a positive development for global stock markets in the long run, said Mr Adisak.
Thanachart Securities expects the SET to rise to 1,900 points at year-end 2018, while Maybank Kim Eng Securities Thailand (MBKEST) sees 1,760 points as a base case, with a price-to-earnings ratio of 16 times.
"The SET should perform better in the first half of 2018 than the second due to domestic political factors," said MBKEST.
