A “January Effect” is the term in capital markets to indicate a tendency for stock prices to rise in the first month of the year following a year-end selloff for tax purposes, and it is likely to happen in the Thai stock market this year.
According to FSS International Investment Advisory (FSSIA), there is a probability of 70%, tracing back 10 years, for the SET Index to rise at an average of 1.28%. The firm stated that many factors signaled that it could happen again this year, following a 15% plummet in 2023.
FSSIA expects the Thai economy to accelerate from 4Q23, while the government is expected to release more stimulus measures for spending and investment, which should enhance investor confidence.
Headwinds from cost-push inflation will likely be lower than anticipated due to lower-than-expected electricity costs and minimum wage raises. Thailand expected strong economic growth this year at 3.2% ex-digital wallet, which would be driven by strong private sector and a recovery in exports and tourism.
Still, FSSIA raised concern on the banking sector with a slightly negative view on the 4Q23 performance outlook, expecting seven major banks under its coverage to report an aggregate net profit of 45 billion baht in the final quarter of last year (-10.7% QoQ, +36.1% YoY). The QoQ decrease would be due to higher seasonal expenses and expected credit loss, while the YoY increase should be the result from rising interest rates, NIM expansion and slight loan growth.
Among stocks in the banking sector, FSSIA expected TISCO and BBL to be the top performers, while KKP would have the worst performance. Overall, FSSIA estimated the seven banks to record an aggregate net profit of 197.8 billion baht (+19.6%).
Additionally, FSSIA noted that it sees valuation of the SET Index as attractive for long-term investment as the index is trading at a 2024 PER of 14.9x with a wider earnings yield gap of 4%.
SET Index target for 2024 remained at 1,520 points, stating that the index level below 1,400 should have a limited downside and presents a good opportunity for accumulation. AOT, BCH, CPALL, CPN, GPSC, MINT, SJWD, TIDLOR, and TU are top picks for FSSIA this year.
