Thai Banks, Top Gainers in 2009, May Rally, CLSA Says (Update1)
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By Anuchit Nguyen
June 29 (Bloomberg) -- Thailand’s banks, the best- performing industry group on the country’s stock market this year, may extend their rally as a rebound in loans to individuals and small companies boosts earnings, CLSA Ltd. said.
The brokerage is keeping its “overweight” rating on Thai banks even after recent gains, on the expectation low interest rates will spur loan demand, said Andrew Stotz, head of Thailand research at CLSA. He recommends larger private banks that have increased their market share at the expense of weaker small and foreign rivals, he said, declining to name companies.
“Banks aren’t expensive and have a long way to go up,” Stotz, who was ranked No. 1 in Thailand research this year by Institutional Investor magazine, said in an interview today. “Consumer and small and medium enterprise loans will probably start to rise. The potential for corporate loans to rise is probably one or two years away.”
Bangkok Bank Pcl and Kasikornbank Pcl and other Thai banks have boosted loans to individual borrowers and small and medium- sized companies, or so-called SMEs, as slumping exports and idle capacity cut demand for new funds from large corporations. Southeast Asia’s second-biggest economy shrank 7.1 percent in the first quarter, pushing the country into its first recession since 1998, on slumping exports and tourism.
CLSA recommends that investors buy shares of Bangkok Bank and Kasikornbank, according to data compiled by Bloomberg.
The SET Banking Index, a measure of 12 publicly traded lenders, has surged 62 percent this year, the biggest gain among 26 industry groups on the Stock Exchange of Thailand. ACL Bank Pcl, controlled by Bangkok Bank, the biggest lender, topped the group by soaring 162 percent this year.
Political Tension
Kasikornbank, the nation’s third-biggest lender by assets, expects demand for loans to recover in the second half of this year, helping it to meet its lending growth target of 5 percent for 2009, President Prasarn Trairatvorakul said on June 10. The bank’s lending from January to May contracted 4 percent from a year earlier because of the recession, he said.
“There is a high possibility that our economy may have bottomed,” Bandid Nijathaworn, deputy governor at the Bank of Thailand, said late yesterday. “Stimulating local consumption may help sustain the economy, but it can’t replace exports.”
Still, Thai lenders faces “near-term pressure on asset quality” as a slowing economy hurts the ability of borrowers to repay the loans, said Stotz. Concern about political rifts will also damp foreign confidence in the Thai stock market, he said.
“Overseas investors know Thai shares are cheap, but political risk here is also so high,” said Stotz. “They just want to avoid risky markets like Thailand and focus on other markets.”
Valuations
Thai stocks trade at 11.3 times of their estimate earnings for 2009, the cheapest in Asia after Pakistan, according to the data compiled by Bloomberg.
More than 10,000 anti-government protesters who support former Prime Minister Thaksin Shinawatra gathered in Bangkok during the weekend in what organizers called the largest rally since the army quelled riots by the group in April. The protesters say Abhisit’s government is illegitimate because he came to power after a court dissolved the pro-Thaksin ruling party.
To contact the reporter on this story: Anuchit Nguyen in Bangkok at
anguyen@bloomberg.net 
