The Government Pension Fund (GPF) will give more weight to Thai shares in the second half, citing ramped up big-ticket infrastructure investment and the high price of foreign equities.
Yingyong Nilasena, chief investment officer at GPF, said Thai stocks have an upside potential as state spending in infrastructure projects will boost the country's GDP. This expenditure will increase local consumption and private sector expansion.
Moreover, Thai stocks are laggards in the region, while stock prices in developed markets have skyrocketed.
The Thai stock market has risen 2.6% so far this year to close the market at 1,582.36 points on Friday.
Even though shares in foreign markets are relatively high, the GPF still needs to retain a portion of money in assets abroad for diversification purposes, he said.
The fund anticipates its return on investment will be better than Thailand's inflation rate. The Finance Ministry allows the GPF to apportion up to 30% of its total investment portfolio to global assets.
The fund has allocated 27% to foreign assets, including stocks and real estate investment trusts, with returns from those investments being higher than those for its local ones during the first half this year.
But core investment of GPF remains in the bond market, as it is legally required to invest 60% of its investment assets in fixed income.
GPF is now negotiating with the Finance Ministry for more investment flexibility.
It is looking to reduce bond exposure in the long-term since the return on bonds was very low, while the local interest rate is expected to reverse its trend next year following the US Federal Reserve's rate rises.
In contrast, many listed companies yield higher return than bonds.
Regarding the Thai equity market, construction and government related firms, all are forecast to perform well in the second half, although economic and political uncertainties are still driving up volatility levels.
Meanwhile, Saharat Chudsuwan, head of marketing and wealth advisory of mutual and private fund business at Tisco Asset Management, said the US stock market will continue to grow.
The healthcare sector, for example, has underperformed this year and has room for expansion.
Apichart Phubunjerdkul, senior analyst at Tisco Securities, said the SET index will keep rising during the final week of June. Window dressing for the second quarter and last week's announcement on infrastructure project progress by Prime Minister Prayut Chan-o-cha are among the factors that will drive the trend.