Thai stocks jumped nearly five percent on Monday after the opposition Puea Thai party won the weekend general election in a landslide, removing some political uncertainty from the market. The result boosted foreign inflows to $348 million, the biggest so far this year, with strong demand for big-cap bank and energy stocks.
The benchmark SET index surged 4.7 percent to 1,090.28, the highest since May 12, outperforming smaller gains in other Southeast Asian markets, including Singapore and Indonesia. The Thai stock market was Southeast Asia's second-worst performer in the second quarter, inching down 0.6 percent and suffering a net outflow of $1.44 billion. The Thai baht gained 1 percent on Monday amid hopes of inflows into Thai assets.
Some brokers expect a limited further rally as the market awaits key economic policies crucial to drive Southeast Asia's second-biggest economy while limiting the risk of rising inflation.
"Inflationary pressures stemming from increased personal and government spending will likely build and could see the Bank of Thailand possibly accelerating its policy interest rate hikes to temper the higher inflation that could result," said Chow Penn Nee of UOB Economic-Treasury Research. Sentiment in Asia and risk assets, including oil, was positive on Monday as investors grew in confidence over the prospects for the global economy after Greece avoided an early default on its sovereign debt and on signs China's economy is unlikely to make a hard landing.
The MSCI index of Asia outside Japan climbed 1.2 percent by 1005 GMT against a 1.4 percent rise in the MSCI index of Southeast Asia, led by a 5.1 percent surge in the MSCI of Thailand. The MSCI Thailand index is trading at 10.67 times its average 12-month forward price-to-earnings ratio, against 13-15 times others in Southeast Asia, Thomson Reuters I/B/E/S data showed. Suchart Techaposai, head of Thailand country research at Citi Investment Research and Analysis, said the Puea Thai victory should lead to a re-rating of the Thai market although he maintained a year-end local SET index target at 1,150, a potential rise of 5.5 percent.
The outlook for domestic consumption implied potentially higher demand for loans, pushing up Thai bank shares 7 percent to their highest in more than two months. Index heavyweight energy shares jumped 4.2 percent to a one-month high. Shares in developer SC Asset Corp shot up 12.4 percent as the new government will be led by Yingluck Shinawatra, a sister of former Prime Minister Thaksin Shinawatra and a former top executive of the company.
Shares in handset distributor M-Link Asia Corp, run by Yingluck's husband, rocketed 25 percent. Top mobile phone firm Advanced Info Service leapt 6.7 percent and satellite firm Thaicom pushed up 15 percent. They are affiliates of Shin Corp Pcl, formerly part of the Thaksin empire. Retail stocks also gained. They are seen as the best plays since Puea Thai policies are expected to drive consumption and investment. Convenience store chain CP All and building materials supplier Home Product Center Pcl each gained over 5 percent.
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