Developing Economies may face Inflation Risks when US recovers

This is a real issue faced by Emerging Economies not limited by South East Asia, but even felt in South America and Eastern Europe. While US and other developed nations ease, the flow of funds eventually will reach the developing economies, causing ‘bubbles’ in housing market and investment grade products.

Speaking yesterday at the “Tisco Wealth-Krungthep Thurakit Investment Forum” on the topic “Foresee Trends, Build Up Wealth for Investment Portfolio”, Kampon Adireksombut, senior economist at Tisco’s economic strategy unit, said the global economy could stage a recovery next year on support from growing developing economies, including China, India and Asean.

The seminar was co-hosted by the Tisco Group and Krungthep Turakit newspaper.

Based mainly on the anticipated global recovery, Tisco Securities estimates next year’s headline inflation in Thailand at 3.3 per cent. The policy rate is expected to remain at 2.75 per cent before rising in the second half of 2013.

Thai gross domestic product is expected to expand 4.5 per cent this year on export growth of 5 per cent, according to Tisco Securities. Next year’s GDP growth is projected at 5.5 per cent, driven by domestic consumption after the fiscal stimulus and low interest rates. Export growth of 7 per cent is forecast for 2013.

Theeranat Rujimethapass, managing director of Tisco Asset Management, suggested that investors include risky assets in their portfolios to gain returns as targeted. Next year, investors may need to reduce their weighting on long-term bonds and avoid financially troubled Europe, while raising weight in |higher-rate deposits, gold, and stocks in Asia, particularly China, where an economic stimulus is expected after the change of leadership. Chinese stocks are also attractive with an upside of no less than 25 per cent.

Kritrat Hiranyasiri, chairman of MTS Gold, said the gold price was expected to rise by US$60 an ounce to $1,800 by the end of this year thanks to the third round of US quantitative easing and unchanged US monetary policy after the recent presidential election.

Next year’s gold price is forecast to increase by $120 an ounce to $1,920, its previous high in 2011, on expectation of touching a new high of $2,000 an ounce, or Bt28,000 per baht weight. This year’s expected return on gold is estimated at 5 per cent, compared with 7 per cent average return for the past two years.

Surong Bulakul, chief financial officer of PTT, expects the global oil price to stay between $105 and $115 per barrel next year.

Risks to the oil price include political situations, particularly in the Middle East, and Iranian elections. If the political situations become more severe and a war erupts, the price could reach $140 per barrel, |he said.

“Investing in oil could be done through oil futures or PTT Group’s stocks. Oil price movement is expected to affect the PTT Group in both profit and loss from oil stocking by no more than $1 billion,” Surong said.

The Stock Exchange of Thailand remains attractive, with the SET Index’ target of 1,450-1,500 points next year, according to Tisco Securities.

Average earnings growth of Thai listed companies is expected at 20 per cent.

Early next month, the SET Index is likely to fall on foreign investors’ selling before rising later in December on purchases of long-term funds, Tisco Securities said.

Sophon Pornchokchai, chairman of the executive board of the real-estate assessment and research centre at the Agency for Real Estate Affairs, suggested areas along the Skytrain route as the prime locations for property investment.

Via – NationMultimedia

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