The return of foreign fund flows to the domestic capital market is anticipated next year after the yield gap between US treasuries and Thai government bonds narrows, says Asia Plus Securities (ASP).
Mrs Poranee says the narrowing yield gap of US and Thai government bonds heralds a return of foreign funds.
"The gap between the US treasury yield [and Thailand's government bond yield] has become narrower after the Bank of Thailand raised the policy interest rate, while the US central bank has signalled that future rate hikes will come at a slower pace," said ASP executive vice-president Poranee Thongyen. "The narrow yield gap will help attract a return of foreign funds, considered the first time in three years."
The US economic growth and slower interest rate normalisation by the Federal Reserve will help support foreign fund inflows to emerging-market economies like Thailand, she said.
Thailand's current price-to-earnings (P/E) ratio of 14 is relatively cheap compared with those of regional stock markets, Mrs Poranee said.
The Stock Exchange of Thailand (SET) index is projected to close at 1,795 points by year-end 2019, based on a forecast of a P/E ratio of 16 and a return of foreign fund flows, according to ASP.
Based on a historical study, return from the SET index averaged 4% during the past four general elections, with share prices rising by 4.8% on average one week after the elections ended, said Therdsak Thaveeteeratham, executive vice-president for research.
Retail shares are among those receiving the most benefit from general elections, as previous governments had implemented consumption stimulus measures to boost the economy, Mr Therdsak said.
The next round of trade negotiations between China and the US, scheduled for March, is expected to have a good outcome because both countries have learned that the trade disputes have produced negative results, Mrs Poranee said.
Still, market participants should continue monitoring the effects of the Sino-US trade disputes and the impact on the global economic growth trajectory, she said.
A decline in oil prices is one of the main risks for stock market investment in 2019, as this will affect the performance of SET-listed energy and petrochemical companies, subsequently pulling down their earnings estimations, Mrs Poranee said.
ASP forecasts the average Dubai crude oil price at US$70 a barrel next year, up from $65 expected this year.
