05 Sep 2012
Despite the unresolved global economic crisis, Thailand is well positioned to be the centre of Southeast Asia's economic development, says Bank of America Merrill Lynch.
Its bilateral trade agreements with neighbours and central location in Asean have supported domestic growth and linkage with neighbours, Jason Cox, the managing director and co-head of Asia Pacific global capital markets at Merrill Lynch (Asia Pacific) Ltd, a unit of Bank of America Corporation, said in an interview with the Bangkok Post.
He said the country's transparency and technology also meet international standards.
''These factors will support that the country's economy to rise further substantially, and its capital market will continue to be an interesting destination for investors,'' said Mr Cox.
Unsurprisingly, he said, Thailand Focus 2012, the annual major event for the Thai capital market, has attracted hundreds of foreign fund managers eager to enter the market.
Furthermore, Mr Cox pointed out they also realise this is an opportunity for them to look into opportunities in Indochina, as it is not only a Thai capital market.
Mr Cox said for this year and next, the bank's research department projects the Stock Exchange of Thailand (SET) index target still has an upside of about 10% and expects it to reach 1,350 points.
''The upside of the Thai share market will be seen at about 10% through next year,'' he said.
In the long term, the research anticipates equities markets in the region will set new highs on the Asean Link trade that will be in full effect next year.
Mr Cox said several factors can boost Thailand's economy to expand sustainability such as the Asean Economic Community (AEC), the collaboration of the Thai capital market with countries including Laos, Vietnam, Myanmar and Cambodia (the LVMC group) and the earning growth of listed companies that will support the rise of the SET index.
The AEC, scheduled to kick off in 2015, has the potential to boost regional growth through an increase in trade in goods and services as well as attracting foreign direct investment.
It can also help with long-term challenges such as raising competitiveness, energy security and Thailand's deteriorating demographics, said Mr Cox.
The LVMC group of countries currently has the lowest gross domestic product per capita in Asean, but they also have the potential to experience the highest growth.
''They share extensive borders with Thailand, so that could mean existing trade and investment links also have a chance to rise further. The potential of Thailand is incredible,'' said Mr Cox.
As evidence, he said while exports to other Asean countries excluding Singapore have increased five-fold over the past decade, shipments to the LVMC group increased seven-fold in that period.
The value of Thai exports to these four developing economies now exceeds major export markets in the EU.
Meanwhile, tourists will likely focus on new destinations in the LVMC group instead of former favourites Malaysia, Thailand and Singapore.
''But Thailand stands to benefit from this change as a potential hub for tourism in the Greater Mekong Subregion,'' said Mr Cox.
''We believe in Thailand's potential to lead the rising trend including the coming of the LVMC group and the AEC in the long term.''
He said the growth potential in these areas, however, will have no effect on most companies' earnings in the immediate future.
The Thai banking sector is stronger on loan growth than last year, said Asadej Kongsiri, the head of Thailand of Bank of America Merrill Lynch.
Bank of America Corporation, which entered Thailand 60 years ago, currently focuses on Thai conglomerates that are looking for foreign partners, especially in Europe and the US.
The bank provides advisory, financing and cash management.
Mr Asadej said Thai firms are strong with clean balance sheets, low debts, well-developed technology and abundant liquidity.
However, it is not easy to buy assets in Europe despite it being in the throes of a financial crisis, as those problems are occurring among governments and financial institutions while the real sectors have seen less of an effect.
''Assets are not as cheap as clients expect,'' said Mr Asadej.
He suggests buyers focus on strategy rather than price by considering assets that support their existing businesses.