Thai stock market poised for upward surge after rocky start

After a downward trend in the first half of the year, Thailand’s stock market is predicted to come back in the second half, with a 2.7% decline year-to-date making it one of the worst global performers. This potential recovery is anticipated to be driven by a combination of growing fiscal budget disbursement, a weaker baht, and a revival in tourism and exports.

Soraphol Tulayasathien, a senior executive at the Stock Exchange of Thailand (SET), highlighted that despite the Thai index’s decline last month, funds have started to flow back into the market. This is due to eased investor concerns over the Middle Eastern war and fluctuations in oil prices, said Soraphol.

“Oil and gold prices soared last month as inflation may decline slower than expected. Investors were less anxious over escalating geopolitical conflicts in the Middle East.”

He also mentioned that the baht experienced volatility against the dollar in April, with the local currency leading declines among Asian peers. Furthermore, investors are keeping a close eye on US inflation and the Federal Reserve’s decisions on interest rates.

At its most recent meeting, the Fed decided to maintain the policy rate for the sixth meeting in a row, with chairman Jerome Powell warning that the rate will remain high for a longer period. This has led investors to adjust their expectations for a Fed rate cut to only one or two times this year, said Soraphol.

“However, the Thai economy in 2024 is set to grow at a faster pace than last year, propelled by private consumption and the tourism sector.

“Government spending will likely be another impetus for the remainder of this year after public spending and investment shrunk because of a delayed budget bill for fiscal 2024.”

Stock sectors

This positive development has prompted analysts to increase the SET index’s forward earnings per share from the end of last year. Additionally, the valuation of many Thai stock sectors remains below historical averages.

In April, the SET index decreased by 0.7% on a monthly basis to close at 1,367.95 points, a lesser fall than the regional averages. Year-to-date, the benchmark index dropped 2.7%.

The average trading value for the SET and Market for Alternative Investment increased from the preceding month to 44.5 billion baht but dipped 5% year-on-year. Foreign investors were net buyers of Thai sharestotallingng 3.79 billion baht in the month as their trading ratio remained the highest among investor types for 24 consecutive months.

The SET’s forward price-to-earnings (P/E) ratio was 14.6 times at the end of last month, above the Asian bourses’ average of 12.2 times. The historical P/E ratio totalled 17.3 times, surpassing the Asian stock markets’ average of 15.5 times.

The dividend yield ratio was 3.40%, exceeding the Asian stock markets’ average of 3.18%.

Daily trading volume on the Thailand Futures Exchange (TFEX) averaged 459,746 contracts, down 8% from the previous month. For the first four months of 2024, TFEX’s daily trading volume dropped 21.6% year-on-year to 438,862 contracts.