Foreign fund flows have pushed Thai stocks up 20-30% over the past six months, with net buying to date of around 12 billion baht, according to the Securities Analysts Association.
Further inflows were likely as investors look to take advantage of oversold markets, according to Sombat Narawutthichai, the SAA secretary-general.
The SAA increased its consensus estimate yesterday for the Stock Exchange of Thailand, with a year-end target now pegged at 535 points compared with a consensus estimate of 495 in mid-March. The high point for the index was also raised to 582 points from 527, occurring in the fourth quarter of the year.
But analysts cut their economic growth forecasts to a 3.6% contraction for 2009, or double that of the previous survey, as a result of the impact of political instability on investor confidence.
Mr Sombat said fiscal stimulus programmes by the G20 and other nations have helped revive sentiment, sparking a shift in funds towards equities and developing markets.
But he noted that despite recent gains, the SET index had still climbed less than other markets in the region. The index, which closed yesterday at 544.54 points, is up 23.59% over the past three months and nearly 19% for the year-to-date.
Net foreign fund flows for the year to April were around 12 billion baht, a sharp contrast from the net sales of 160 billion in Thai stock recorded in 2008.
Analysts in the SAA survey were split between whether the global economy would bottom out in the first or second half.
Mr Sombat said 48% of analysts believed the global economy would reach bottom in the first half, with 35% choosing the second half. Only 13% expected the worst point to come in 2010.
He said analysts overall were relatively unconcerned with the influenza A (H1N1) outbreak and its potential impact on economic growth.
Analysts also agreed that new infrastructure investment would be critical for future economic growth, and offered support for the government's stimulus programmes to date.
But the SAA was less supportive of populist programmes such as the 2,000-baht cheque handouts or subsidies for public utilities and farm prices, arguing that such measures were less efficient and effective at stimulating the economy.
Analysts maintained a consensus forecast of 5% earnings per share growth for listed companies this year. Building and construction led all sectors with projected EPS growth of 26.3%, followed by energy at 25.8%, while food lagged at 3.5%.
But shipping was projected to see a 52.8% decline in EPS this year, with petrochemicals off 37.6% and electronics down 21%.
In terms of dividends, all sectors are projected to post negative growth this year, with banks the least affected at -1.1% and shipping the hardest hit at -40.8% for dividend per share growth.