Foreign funds return to SET amid Federal Reserve expectations

Foreign funds made a return to the Stock Exchange of Thailand (SET) in February, despite a 3.2% shrinkage of the SET index in the first two months of 2024. The investors’ return was driven by a decrease in expectations of the Federal Reserve’s policy rate cut, which was predicted to happen only thrice this year.

Soraphol Tulayasathien, the SET’s senior executive vice president, affirmed that foreign funds migrated back to the Thai stock market in February, mirroring trends in other regional markets. Nevertheless, the SET index’s prospects were hampered by the National Economic and Social Development Council’s growth forecast downgrade to 2.2-3.2% for 2024.

In February, the SET index saw a 0.5% increase from the previous month, closing at 1,370.67 points. It aligned with the movement of its regional counterparts, despite experiencing a 3.2% fall from the conclusion of 2023.

Soraphol noted the positive impact of export growth, propelled by the revival in global trade and strong consumption growth, supported by the steady recovery of the tourism sector. These factors prompted analysts to commence the elevation of profit forecasts for businesses involved in these industries, leading to a resurgence in the prices of these groups’ securities.

However, amidst local and global uncertainties, analysts continue to advise investors to direct their funds to high dividend stocks for passive income. These stocks have consistently outperformed the SET index and they are seen as defensive stocks with a lower beta than the market average.

In February, the SET and Market for Alternative Investment saw a combined average daily trading value shrinkage of 29.5% from the previous year, to 47.2 billion baht (approximately US$1.32 billion). The average daily amount for the first two months was 47.1 billion baht.

Foreign investors

Foreign investors emerged as net buyers with 3.25 billion baht (US$91.8 million) in February, despite a net sale of 27.6 billion baht (US$779 million) from January through February. Their trading ratio surpassed all other investor types for the 22nd consecutive month.

As of February’s end, the Thai stock exchange’s forward price-earnings (P/E) ratio was 14.3 times, exceeding the Asian stock markets’ average of 12.9 times. The dividend yield ratio stood at 3.31%, surpassing the Asian stock markets’ average of 3.19%.

The Thailand Futures Exchange (TFEX) recorded a daily trading volume average of 393,850 contracts in February, representing a 2.6% decrease month-on-month. The first two months saw a 25.6% year-on-year fall to 399,395 contracts.

In the previous year, SET-listed companies reported total sales of 17.2 trillion baht (about $496 billion), a 2.6% decline from the prior year, with net profit dwindling 10.7% to 961 billion baht (US$27 billion). Manpong Senanarong, the SET’s senior executive vice-president, attributed the reduced sales and net profits to the slump in prices of various commodities, including oil, agricultural products, and food, coupled with the increase in SG&A expenses and high-level interest rates.

Nevertheless, tourism-related sectors such as aviation, hotels, space rental, retail, and telecommunications experienced growth, largely due to government policies, reported Bangkok Post.