SET reaches new high for the year

       Thai stocks continued to march higher yesterday, closing up 1.34% to a yearhigh as most global markets climbed yesterday on continued optimism about the world economy.
       The Stock Exchange of Thailand index closed at 691.73 points, up 9.16, in heavy trade worth 42.67 billion baht, the most in two years. Foreign and institutional investors were net buyers of 4.17 billion and 1.25 billion baht respectively, with retail investors net sellers of 5.42 billion.
       The index, now up 51% since January,rose as high as 696 points in afternoon trade before easing back. Energy stocks gained 2.11%, banks rose 1.81% and ICT closed up 0.92%.
       Around the region, Japan's Nikkei 225 index gained 0.7%, Hong Kong's Hang Seng rose 2.1% and the Shanghai index gained 1.7%.
       But Chaiyaporn Nompitakcharoen,an executive vice-president at Bualuang Securities, warned current valuations were quite high and that interest rates next year may rise faster than expected.
       Bualuang Securities continues to maintain a year-end target for the SET index at 640 points.
       Mr Chaiyaporn said interest rates were previously forecast to rise starting in mid-2010 in Asia and towards the end of next year in Europe and the US."But there are signals that Asian interest rates might pick up starting from the beginning of next year, starting with rates in India and Indonesia," he said.
       Central banks across the world have pushed rates down sharply and flooded the markets with liquidity since late last year to stem the global recession.
       Mr Chaiyaporn said a rate increase would raise funding costs, cutting into earnings and pushing price-to-earnings ratios even higher.
       He said the SET index was now trading at 26 times past earnings, well above the 10-year historical average of 15.
       Bualuang forecasts earnings growth this year at 14-15%, below consensus forecasts of 20%. The broker has a 2010 index target of 720 points.
       "The stock market is always the front frontier for an interest rate hike. But if the economic figures confirm a real economic recovery, the stock market should show sustainable gains going forward," Mr Chaiyaporn said.
       Morgan Stanley, a strategic partner of Bualuang, projects a "W"-shaped recovery for the global economy.
       But Asia should post a "V"-shaped rebound, led by growth in China, India and Indonesia, on three key factors strong financial sectors and central banks, strong fiscal support and low household debt.
       But Thailand would likely lag the region given its dependence on exports.
       Mr Chaiyaporn recommended that investors diversify their assets to help maximise returns.
       Bualuang Securities, a unit of Bangkok Bank, recently launched its Executive Wealth programme offering investment advice for clients across three to seven asset classes.
       Pichet Sithi-Amnuai, president of Bualuang Securities, said the service was offered to both corporate clients and individual investors.
       "There are many companies that want better returns for their cash in hand than the 0.75% paid for bank deposits,"he said."Retail investors are also asking more about other investment choices,such as bonds or property funds."