This spring's political violence brought the rally in Thai equities to an abrupt halt and ended in a tense stalemate. So few would have expected the SET index to shoot upwards. Yet it has gained more than 20% since May and has now reached a 14-year high.
This is largely because "the economy doesn't seem to have missed a beat" over the nine-week violent demonstrations this year, says Tim Johnston on FT.com. Exports, which account for 65% of GDP, expanded by 21% year-on-year in July. Consumption is strengthening too as employment rises. And consumer confidence is at a 28-month high.
Tourism, comprising 6.5% of GDP, looks in solid shape. The state tourism agency expects 14.5 million foreign visitors this year. That's below its pre-riots estimate, but still an increase from last year's 14.15 million. Overall, GDP estimates for this year have been revised up after the second quarter showed annual growth of 9.1%. The central bank is now pencilling growth of 7% this year, which would be the fastest rate since 1995, says FAZ.net.
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So foreign investors have returned. Perhaps they recall that Thailand boasts lots of natural resources as well as a thriving tourist industry. It's also a low-cost manufacturing centre. Meanwhile, the influx of money from domestic investors has actually exceeded foreign money flows of late and is becoming an increasingly important influence on the index, says UBS.
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Can the rally last? Valuations still look reasonable, with earnings set to grow by 17% this year and the average p/e at around 13.3, says FAZ.net. One potential problem, as ever, is renewed political conflict. But another upsurge of unrest may not occur before next year when fresh elections are likely to be held, says Capital Economics.
The key problem is "weaker external conditions" as global growth cools. Goldman Sachs is expecting a marked growth slowdown in Asia, given that the region is not yet strong enough to shrug off a downturn in the West. Nor will markets be immune to further financial scares. All of which suggests the London-listed Aberdeen New Thai Investment Trust (ANW), our favourite bet on Thailand, seems likely to be available at a greater discount to net asset value than the current 14% in the months ahead.
