Optimism for Thai stock exchange rebound despite US economic downturn

InnovestX Securities, part of the SCB X Group, expressed optimism about the rebound potential of the Stock Exchange of Thailand (SET) index. The company predicts the index could approach 1,700 points this year, driven by stabilising global interest rates and domestic economic stimulation efforts.

The first quarter of 2024, however, could be marked by volatility, with possible economic downturns in the US making bonds an attractive investment option. Despite this, the Thai stock market is teeming with opportunities, with undervalued equities making it appealing to long-term investors, according to the brokerage, stated Sukit Udomsirikul, Chief Research Officer at InnovestX.

“Intrinsic values are significantly higher than current stock prices on the SET, providing numerous long-term investment opportunities.”

He further highlighted the appeal of Asian stock markets over their US and European counterparts, attributing this to sustained high growth rates. A downward adjustment in inflation rates could lead to increased foreign capital inflows into Asian markets, especially if the US dollar weakens.

On the global front, senior economist Piyasak Manason spoke of a looming slowdown in developed economies like the US and Europe. This could prompt the Federal Reserve to slash interest rates by 1% in the first half of the year. Meanwhile, China’s economy is on the mend, supported by monetary policy easing, though it still grapples with structural issues like deflation, reported Bangkok Post.

“Digital wallet measures could be a key driver of Thailand’s economic growth. If introduced as planned by the government, they could boost the economy by 4.1%. Without the 10,000-baht digital handouts, we foresee a more modest expansion of 3.2%,”

Volatile stocks

Pichai Lertsupongkit, Chief Commercial Officer, highlighted that as interest rates peak, bonds and gold could offer good returns, even as stocks remain volatile.

“We believe investing in foreign markets remains crucial and an attractive option for investors due to the diverse range of alternative assets and greater investment opportunities.”

Sutthichai Kumworachai, a senior analyst, anticipates that central banks worldwide, excluding Japan, will begin to lower interest rates in 2024.

For their 2024 asset allocation, InnovestX recommends prioritising high-quality debt instruments, including government and corporate bonds with investment-grade ratings or higher, which could gain from the anticipated decline in interest rates.

Investors are also encouraged to consider Asian stocks, including those in Thailand, more appealing than developed markets due to the recovering economy. They should also look at global stocks in the second half of 2024 as the economy rebounds, focusing on value and cyclical stocks.

The brokerage also advocates for diversification into alternative assets such as gold and real estate investment trusts.

Market fluctuations

Beyond economic trends and interest rates, Sukit Udomsirikul warns of the potential for geopolitical events to introduce market fluctuations. He singled out conflicts affecting energy and food prices, transport disruptions, and economic warfare, like the US-China tensions.

“Post-presidential elections, China’s stance on Taiwan, and the US presidential elections in November could influence the Russia-Ukraine conflict”

He also highlighted the importance of not overlooking the unpredictable yet crucial factors of climate change and natural disasters.