Thailand Strategy:Mind the gap

SET Index has performed well with a 9.9% increase YTD, which in our opinionhas been due to the expectation of positive impacts from major infrastructureprojects, Eastern Economic Corridor/EEC, and a clearer election timeline.

    This has led to a high expectation, which reflects demanding marketvaluations (2017E PER of 17.0x, +2SD), and in our opinion has set up themarket for disappointment as we believe that there are “gaps” between themarket expectation and execution capability.

    In this update, we therefore take a look into the government infrastructureprojects, which we have doubts on the contractors’ ability to further absorb theupcoming bidding. We also expect only a Bt65.0bn disbursement ofgovernment infrastructure projects, and we believe that positive impacts to theprivate investment and consumption will remain relatively lukewarm until thecompletion of key projects which will be 2020 or later.