Investment in the Thai bourse has become less attractive this month as the earnings gap between domestic stock investment and the 10-year US bond yield dropped to the lowest level since 2007, says Trinity Securities.
The drop is because the 10-year US bond yield recently climbed to 3%, said research manager Nattachat Mekmasin.
The earnings gap between the Thai stock market and the 10-year US bond yield has averaged around 5.1% over 2006-18, but dwindled to 3.1%, making investment in the Stock Exchange of Thailand (SET) less appealing, said Mr Nattachat.
The earnings gap is calculated from the bourse's expected earnings per share (EPS) in 2019, divided by the current SET index, he said.
The SET's expected dividend yield for next year is forecast at 3.1%, making the spread between domestic stock investment and the US bond yields nearly zero compared with the average gap in the past of around 0.8%, said Mr Nattachat.
Additionally, the fundamentals of SET-listed companies do not align with the bourse's investment outlook going forward, prompting analysts to continue revising down their SET index targets and EPS for 2018 and 2019, which automatically pressures Thai stocks to become more expensive, he said.
"The reason for downgrading the SET's EPS from April is due to how analysts have downgraded returns among major listed companies," said Mr Nattachat.
Other factors inducing lower investment appetite in the bourse include rising crude oil prices and the US dollar appreciation, both of which could add pressure to commodity prices, he said.
PTT, one of the biggest stocks in the SET, has also split the par value, which will make share trading static for a while, said Mr Nattachat, adding that analysts have also downgraded returns in the banking and food sectors on the back of lower fee income and an increase in meat prices.
Separately, the SET Monday celebrated its 43rd anniversary, with outgoing SET president Kesara Manchusree saying the bourse's average trading value registered earlier this year was around 60 billion baht per day, higher than 30 billion baht recorded in Singapore's stock exchange.
"The SET plans to be a trading hub for Cambodia, Laos, Myanmar, and Vietnam [CLMV]. We welcome the listing of companies from CLMV countries and expect to see the first listing within this year," said Mrs Kesara.
The two largest IPOs, excluding the Thailand Future Fund, expected to be listed on the SET this year are century-old consumer goods conglomerate Osotspa Plc and Bangkok Commercial Asset Management Plc, she said.
