UBS delves into Thai stock insights, recognizing the market’s recent underperformance but highlighting newfound attractiveness in valuation. The analysis unveils potential in Thai stocks amid evolving market dynamics, offering investors a fresh perspective on emerging opportunities.
UBS, the Swiss investment bank, believes the current landscape for EM and Asian equities presents challenges due to the global economic slowdown, escalating tariff risks, and the impact of US policies.
US Market Outlook
While UBS expects the US stock market to outperform in the 12 months, they foresee the possibility of EM equities showing tactical outperformance in the short term of 1-3 months as the US exceptionalism diminishes, potentially leading to market consolidation. The slowing US economy has not yet been factored into earnings expectations, with UBS anticipating a reduction in consensus’ S&P500 earnings growth from 14% to their projection of 6-7%, alongside a widening risk premium that could result in the S&P500 hitting a bottom in Q2 of 2025.
MSCI EM/AxJ Outlook
UBS predicts a modest 3% and 8% upside for the MSCI EM and MSCI Asia ex Japan, respectively, mainly driven by the positive performance of the Chinese market. Following a significant market correction, UBS takes a more favorable view on Thailand, upgrading their recommendation to overweight.
In the ASEAN region, specific macro and idiosyncratic factors have heavily impacted countries like Malaysia, the Philippines, and Thailand, causing valuations to reach Covid-related lows. Thailand, according to UBS, presents an opportunity for an overweight position due to reduced sell-offs triggered by policy-driven factors and company-specific issues. The optimism from UBS’s Thailand team sits at a five-year high, signaling a positive outlook for the market.
UBS notes that Thailand has seen a reduction in political and policy uncertainties and specific concerns related to large-cap companies. Anticipating the execution of government policies such as fiscal stimulus and tourism recovery, paired with an uplift in the consumption recovery trend, UBS expects these factors to drive market growth. The recent expiration of the long term fund (LTF) tax incentives might lead to equity fund redemptions, but UBS believes that potential new tax incentives (Thai ESG Extra) could offset this effect. Additionally, the decision to cap single stock weights in SET indices could reduce large-cap bias, especially impacting Delta Electronics (Thailand) and positively impacting market valuations.
CPALL and AOT
UBS has provided specific insights on idiosyncratic stocks within the MSCI Thailand index, including CP All and Airports of Thailand.
CP All, constituting 9% of MSCI Thailand, saw a correction in post-investment decisions in group companies, raising governance concerns. A UBS analyst noted a projected minor negative impact of around 3% on CP All’s earnings in 2025-26E, but highlighted positive catalysts ahead. The fundamental outlook for CP All remains strong, with an estimated EPS compound annual growth rate (CAGR) of 15% over 2024-26E, with plans to open 700 stores in Thailand and expand into Cambodia and Laos.
Airports of Thailand (AOT), making up 5% of MSCI Thailand, faced challenges related to the concession revenue outlook. UBS analysts believe that the market has factored in a bearish scenario, discounting any potential upside from the current concession terms.
Market Tailwind
UBS also highlighted longer-term tailwinds in Thailand. The Entertainment Complex Business Act could potentially uplift real GDP by 1-1.3% by 2030-31, with financials, consumer & tourism, and property sectors identified as key beneficiaries. AOT stands out as having significant potential upsides in this context.
Financial Sector & Trade Outlook
Regarding financials, UBS expressed optimism about the Thai Financial sector. UBS’ Financials Analyst expects a decrease in credit costs to 137 basis points in 2025E from 149 basis points in 2024, with Thai banks adequately provisioning for re-emerging non-performing loans (NPLs), thanks to the Bank of Thailand’s debt restructuring efforts.
Even though Thailand has a modest trade surplus with the US and minimal direct US revenues in the MSCI Thailand topline, potential risks exist if the proposed ‘reciprocal’ tariffs by the US are enforced due to existing tariff imbalances.
Recent upgraded from UBS
| Company | UBS PT (Price Target) | Upside/Downside |
|---|---|---|
| True Corporation | 15.6 | 44% |
| Kasikornbank | 176.0 | 18% |
| TMB Thanachart Bank | 2.1 | 10% |
| PTT Oil and Retail Business | 14.0 | 33% |
| Thai Oil | 27.0 | 4% |
| WHA Corporation | 5.6 | 61% |
| Ngern Tid Lor | 19.0 | 28% |
Additionally, there are several stocks that are among preferred list in UBS’ analysis paper. These stocks are Airports of Thailand, CP ALL, PTT E&P, True Corp, Kasikornbank, Krungthai Bank, Central Retail and PTT Global Chemical. All of the mentioned stocks were rated ‘BUY’.
