Traders in the Thai stock market saw some light at the end of last week after foreign investors bought the dips as the market fell to a nearly five-year low. However, the positive sentiment was short-lived as the market continued to slide this week back to bear market.
At a conference on March 10, 2025, CITIC CLSA noted that the negative sentiment was due to uncertainties in the U.S. economy that will likely have to bear the “pain” from intense trade tariffs initiated by the Trump Administration as inflation will certainly rise, prompting the Federal Reserve to be more cautious on its monetary policy. The U.S. Economic Policy Uncertainty Index is now higher than the level after 9/11, though still below Covid.
After the peak of S&P 500 in February 2025 post election and Donald Trump’s inauguration run, the U.S. stocks have been declining consistently to now the lowest level since September 2024. CLSA noted that it expects to revise down the S&P 500 forecast as equity is now expensive , while eroding bond yields also hit the U.S. dollar.
Based on the Taylor Rule, the policy rate of U.S. Should be higher than the current level, however, CLSA stated that it is understandable the Federal Reserve is now ahead of the curve, seeing inflation at lower level in years.
Trump signals that there will be some pain for U.S. consumers as he goes off with tariff hikes on trade partners. Coupled with migration and policies, CLSA expected a 0.5 percentage points impact to the U.S. economy this year with sticky inflation and another 0.5 percentage points next year as prices are coming off. Still, the firm did not see a potential of recession in the U.S. economy.
CLSA expected to see a rotation in trade partners if Trump’s tariffs persist with European nations turning to make more deals with Asian businesses. The most crucial implication would be on China that could face up to 60% increase in tariffs. The firm anticipated a tit-for-tat from both countries to a certain point before bringing their cards to a negotiation table. An increase of U.S. agricultural products and market access are the most realistic options for China.
As investors are now reallocating US equity, the firm saw Europe and Japan as potential beneficiaries despite Indonesia and Thailand that have been lagging the most among emerging markets.
Based on historical data, EM requires foreign funds to drive the market, and CLSA sees little possibility of that going into Indonesia and Thailand. Still, the current valuation is very attractive for investors with exposure. Amid all these withdrawal from the U.S. and EMs, CLSA noted that China is the biggest distraction among ASEAN markets.
For Thailand, CLSA pointed out that high household debt is the main drag, resulting in weak domestic consumption. Surprisingly, the firm stated that the foreign direct investment (FDI) in data centres does not impact the Thai economy as much as the coming of EV does.
Exports of goods and services are expected to come down to 6.4% in 2025 from 7.8% in 2024. Meanwhile, the impact on Chinese travellers being cautious of coming to Thailand should last for about a quarter.
Despite the SET Index struggling in the first two months, CLSA has not revised SET Index target down, maintaining at 1,450 by year end 2025. The firm picked AMATA, BDMS, CPALL, CPN and KTB as its top picks. Tourism stocks have posted notable gains, but CLSA preferred medical tourism instead due to its being more resilient.
Foreign net sell occurred across EMs, not just Thailand, and its low valuation could be an entry point for investors with high exposure, the firm said.
