Thai equities have underperformed MSCI ASEAN/AxJ by 10% and 20%, respectively this year, while posting a decline of 15% year-to-date. Still, J.P. Morgan sees potential for a short-term rally spurred by pro-growth policies and ESG tax incentives.
The anticipated economic boost from China’s recovery could attract more investment to emerging markets, favorably impacting Thai stocks. Noteworthy are stocks with significant recent sell-offs and high dividend yield plays, which could benefit from this renewed optimism. However, the US investment bank noted that this is a tactical strategy not structural move, considering its view that the bleak outlook is not yet fully priced into earnings expectations or equity valuations, which could be further challenged by upcoming headwinds including seasonal lows in tourism, dividend payment season and impending tariffs.
JP Morgan noted that local funds have raised their cash allocation sharply to 9.8% by the end of January 2025. The rotation in January was noticeable as the funds withdrew from Commerce, Energy & Utilities and Healthcare. Fund flew into Banks, Transportation, ICT, and F&B instead.
Additionally, the firm recommended two strategies over the medium-long term for investment in Thailand: 1) Defensive plays with resilient earnings and reasonable valuation, and 2) Long-term picks with structural growth paths.
