Market not at rock bottom yet, says SCBAM

THE BOTTOM is still eluding the stock market while the economy does not stand a chance of expanding more than 2 per cent in 2015, so investors have to be more defensive and selective, according to SCB Asset Management (SCBAM). 

The main index has been resilient this year amid external turbulence – Greece’s debt crisis and China’s stock market meltdown – because of low foreign holdings in both stocks and bonds and the country’s strong financial fundamentals.

However, hostile onshore factors are making the Stock Exchange of Thailand suffer right now.

“If you ask me where the bottom of the index is then I have to say that I cannot see it right now as we are looking for it,”, Narongsak Plodmechai, senior executive vice president and chief investment officer at SCBAM, told reporters last week.

“Exports are contracting, domestic consumption is weak from high household debt while government spending on mega-projects is still unclear.

“I believe that private confidence will not recover until the construction stakes start hitting the ground,” he said.

The deprecating baht is not helping Thailand’s export sector as other currencies in the region are also spiralling down. 

The index’s nadir before the latest plunge was around 1,470 points. This barrier has been breached three times this year before diving to 1,428.79 points at Friday’s close after the Commerce Ministry released its latest export prediction followed by the Bank of Thailand’s acknowledgement that the country will not be able to expand by more than 3 per cent this year because of exports.

The ministry recently downgraded its 2015 export forecast from 2-per-cent growth to 3-per-cent contraction following a decline of 4.8 per cent in the first half.

“The private sector is not responding to good news such as the brushed-up stimulus package because of the lack of confidence.

“The index has a chance to go even lower than 1,400 points in the coming months because of uncertainty regarding the growth of listed companies,” he said.

“The way to set our investment portfolio during these tough times is to make sure it will be able to defend against whatever is being thrown at it to limit loss while the expected rollover of confidence in three months is the new hope,” he said. 

“There is no ‘best’ stock at the moment as there is only the ‘least affected’ and this is where the opportunity lies, as ‘badly affected’ money will run to these least affected stocks,” he said. 

Sector plays are not working right now so investors have to look at individual stocks and find the ones that have the most potential, expect to maintain growth and continue to expand with profits.

“You had better know the company more than the economy, as the company is easier to forecast,” he said.

Investors can forget about GDP growth and follow the bottom up approach by “looking for value and where cashflows are being generated to the economy” because the global oil price will continue falling from the increasing supply in the US and Iran. 

“Looking outside is another choice and SCBAM is investing in Japanese and European stocks while staying neutral on US shares,” he added.