InnovestX, an investment flagship of SCBX group, assesses that the most challenging period of the year is likely to pass during the first quarter of 2024. The Thai stock market is expected to begin its recovery in the second quarter of 2024 and progressively improve in the latter half of the year, as previously estimated early this year. This optimism is partly due to the potential for relaxed financial policies in major economies like the United States, along with the ongoing consideration of Thailand’s budget disbursements. Should these disbursements be efficiently executed, Thailand’s GDP growth is estimated to reach 3.0%, spurred by increased public and private investments. Conversely, if disbursements fall short of expectations, the Thai economy might only achieve a 2.5% growth rate. In such a scenario, it is anticipated that the Bank of Thailand could cut interest rates twice. The target for the SET Index is set at 1,550 points. For Q2, InnovestX highlights stocks that have bottomed out and would benefit from interest rate cuts, including AOT, GFPT, GULF, KCE, and SCGP, as key investment focuses.
Mr. Sukit Udomsirikul, Chief Research Officer of InnovestX Securities Co., Ltd., observed, “The global economy is poised for a gentle deceleration (Global Soft-Landing) in the second quarter of 2024, yet it’s performing better than analysts initially forecasted. This deceleration, coupled with the declining inflation rate in the United States, opens the door for the Federal Reserve to lower interest rates within the year. On the other hand, the Chinese economy is witnessing a rollout of stimulus measures across various sectors. Should China’s growth align with governmental projections, it is expected to positively influence Asia’s economic landscape and stock markets, with Thailand standing to benefit notably. The trajectory of Thailand’s economic growth in 2024 is largely contingent on government expenditure. Additionally, a potential reduction in interest rate policies could further bolster the Thai economy. These dynamics are anticipated to positively affect the Thai stock market in Q2 of 2024, with a SET Index goal of 1,550 points. Key sector recommendations include commercial, electronic components, food and beverage, transportation, and public utilities.”
As for the new measures recently introduced by the Stock Exchange of Thailand (SET) regarding a disclosure of information on short-selling securities that have not yet been repurchased (Outstanding Short Positions), Mr. Sukit has a positive view on this proactive action, believing that the measure will improve confidence of local investors that have seen a decline in daily trading proportion significantly as of late, which will bring back trading value in the market as well.
Dr. Piyasak Manason, head of Economic Research at InnovestX Securities Co., Ltd.’s Investment Strategy Division, remarked, “Our assessment reveals that the global economy is outperforming expectations, with the U.S. economy leading the way. However, we foresee potential slowdowns due to three primary factors: the repercussions of rising interest rates, heightened risks within the banking sector, and escalating global economic uncertainties, notably geopolitical tensions. Despite a reduced likelihood of a global recession, Europe’s economy faces recession risks, though there’s now more flexibility in monetary policy. In Japan, the Bank of Japan (BOJ) has increased interest rates for the first time in seventeen years but continues to support an accommodative monetary stance by purchasing long-term government bonds. We recommend closely watching the reverse yen carry trade activities, though we anticipate the BOJ will maintain a cautious and incremental approach to monetary policy, mitigating the impact on capital flows. The Chinese economy is poised for a short-term rebound, yet it confronts enduring challenges from the trifecta of real estate issues, deflationary pressures, and employment crises.”
Mr. Sutthichai Kumworachai, Head of Investment Strategy at InnovestX Securities Co., Ltd. stated “Advised keeping a close eye on the recent surge in crude oil prices. This uptick could slow the reduction of inflation rates below central banks’ targets, potentially affecting plans to lower interest rates this year. The rise in oil prices is attributed to stronger demand growth, buoyed by a global economy that is performing better than anticipated, as well as production cuts by OPEC+. Should this situation persist, it might lead to a supply shortage in the oil market. Regarding interest rate cuts, it’s now assessed that the Federal Reserve (Fed) might reduce rates in its June meeting, possibly cutting them 3-4 times throughout the year. The European Central Bank (ECB) is also expected to cut rates, potentially even before the Fed, with forecasts suggesting a start in June and a total of four reductions this year. As for the Bank of Thailand (BOT), rate cuts could commence in the Monetary Policy Committee meetings in April and June, reflecting the economy’s ongoing fragility.”
Mr.Sittichai Duangrattanachaya, Senior Global Equity Strategist at InnovestX Securities Co., Ltd., shared insights on the Q2 2024 investment strategy. “Our strategy focuses on stocks that have already hit their performance lows and are beginning to recover. We anticipate a shift in investment weighting (Rotation) from Developed Markets to Emerging Markets, with new investment flows increasingly directed towards non-tech and cyclical sectors starting from Q2 onwards. While the technology sector remains attractive with companies like TSMC, ASML, Microsoft, and Alphabet, there’s growing interest in non-tech and cyclical groups, including Airbus, Home Depot, Pfizer, Walt Disney, China Mobile, Baidu, and CATL.”
For the Thai stock market, the SET Index target is set at 1,550 points, with key buying opportunities identified below the 1,400 point level, anticipating an expected return of 12%. The highlighted stocks for Q2 2024 are those that have already seen their lowest performance points and are set to benefit from interest rate cuts. These companies feature strong financials and cash flow, a clear trajectory towards recovery, and stand to gain from the revival of the industrial production cycle and government budget allocations, which should jump start the Thai stock market starting from the second quarter. Key stocks to watch include AOT (TP: THB80), GFPT (TP: THB14.50), GULF (TP: THB63), KCE (TP: THB52), and SCGP (TP: THB51), all of which are well-placed to capitalize on these improving conditions.
“For our long-term investment strategy, we continue to recommend the Dollar-Cost-Averaging (DCA) approach, especially as the Thai stock market is recovering more slowly compared to regional markets and stock prices are significantly undervalued. We anticipate the SET Index will remain volatile, making this an optimal time for DCA investment due to the substantially reduced risk and the high potential for future profits. Stocks considered for DCA should have solid fundamentals, be undervalued, and show consistent operational growth, including BBL, BDMS, BEM, CPALL, PTT, and SCC. Additionally, we offer advice for a Bi-weekly Portfolio and Daily Top picks to further guide investment decisions”. Mr. Sukit emphasized the extensive resources InnovestX offers to investors.
He also noted that the developed markets, such as the U.S. Europe and Japan, have been outperforming in the first quarter of this year, which should have positive sentiment to the Thai stock market as well. Moreover, once the Fed cuts its policy rate for the first time, possibly in the second quarter, and the US dollar starts to depreciate, Asia markets and the Thai stock market should benefit from the fund inflows in Q3 and Q4 2024.
Mr. Sukit added that the banking, energy and property sector should offer good dividend yield this year, but noted that expectation for a movement in share price could be limited. Additionally, Mr. Sukit pointed out that what the Thai stock market lacks is confidence, while urging investors to be confident in their own investment. A careful and thorough study in fundamental and sustainable stocks should motivate investors to return to the Thai stock market.
Mr. Payon Pongsawaree, Assistant Managing Director of Wealth Products and Strategy of InnovestX Securities Co., Ltd., shared his perspective on asset allocation for the second quarter, stating, “Our asset-specific investment outlook for Q2 remains positive towards bonds, which not only offer an appealing current yield but are also likely to benefit from the global trend of decreasing central bank interest rates, enhancing debt security prices. This serves as a risk diversification tool during volatile market periods. We emphasize investing primarily in high-quality debt instruments, avoiding low-asset-quality bonds. We recommend the UGIS-N fund, which invests through the main PIMCO GIS Income Fund, targeting high-quality debt securities worldwide. As for equities, we have adjusted our investment stance on U.S. stocks from cautious to neutral. Despite the overall economic slowdown, the continuous upward revision of earnings estimates indicates potential. For emerging market stocks, although valuations are attractive, we advise selective investment in markets with specific supportive factors and not overly expensive valuations, such as the Thai, Vietnamese, and South Korean stock markets. We suggest the TISCOHD-A fund for investing in high-dividend, high-quality large-cap Thai stocks, combined with the ASP-SME-A fund for high-growth small and medium-sized Thai stocks. The Principal VNEQ-A fund is recommended for investing in Vietnamese stocks with long-term winner potential and structural growth, and the SCBKEQTG fund for investing in top South Korean stocks like Samsung, a leading memory chip manufacturer benefiting from the growth in semiconductor exports. Investing in these Thai funds not only helps diversify portfolio risks but also alleviates concerns about foreign taxes for investors.”
Investors interested in foreign markets and other assets can access analyses and investment strategies offered by InnovestX, which encompass a wide array of short and long-term approaches. You have the flexibility to invest according to your preferred strategy and access these analyses on www.innovestx.co.th and Facebook InnovestX.
