In what has been a difficult period for the Thai stock market, the SET Index has emerged as the third worst performer among major Asian markets over the last six months, and the worst over a span of 12 months.
This decline marks a stark contrast to expectations in October 2024 when the market appeared poised to breach the 1,500 resistance mark, a peak not reached since September 2023. However, a sequence of pivotal events has severely eroded investor confidence and market resilience.
The initial setback arose following an October rate cut by the central bank, which coincided with underwhelming third-quarter results from major banks. This disappointment was compounded by escalating issues within Thai Oil Public Company Limited (SET: TOP) concerning subcontractors. Although the predicament was attributed to main contractors failing to fulfill wage obligations, the turmoil delayed Thai Oil’s Clean Fuel Project (CFP), adversely impacting refinery capacities. As Thai Oil functions as PTT Public Company Limited’s (SET: PTT) refinery division, this disruption presented the first blow to investor sentiment. PTT is Thailand’s largest state-owned enterprise in the energy sector.
Subsequent damage to market perceptions involved a political controversy surrounding former Prime Minister Thaksin Shinawatra’s perceived influence over the Pheu Thai Party and governmental policy, leading to a sharp decline in key stocks such as ADVANC, INTUCH, and GULF. The Thai market’s sensitivity to political upheavals was evident in these rapid shifts.
In late November, the release of an unofficial document alleging misconduct in pricing practices at PTT and its subsidiary, PTT Oil and Retail Business Pcl. (SET: OR), introduced further volatility. Although the Department of Special Investigation later disclaimed the report’s authenticity, damage had already been inflicted, particularly given OR’s substantial role in the oil retail sector.
December witnessed CP Axtra Public Company Limited’s (SET: CPAXT) contentious investment in The Happitat at Forestias, raising concerns over corporate governance. Despite reassurances from CPAXT’s CEO regarding the strategic rationale behind the investment, market skepticism lingered, especially considering the involvement of the Chearavanont family and the CP Group, owners of Thailand’s 7-Eleven franchise.
The persistent strike at Thai Oil’s CFP persisted through this period of uncertainty, exacerbating existing strains. Meanwhile, the implementation of a Global Minimum Tax in early 2025, compelling multinational corporations like Delta Electronics and Thai Union Group to incur higher tax liabilities, further strained the market landscape.
Adding to the unease, the Pheu Thai Party’s advocacy for reduced electricity tariffs posed additional challenges for Thailand’s power sector, intensifying financial pressures on energy generators.
The latest development rattling investors was the potential management buyout of Seven & i, involving CP Group, the owner of 7-Eleven in Thailand. Reports of CPALL engaging in talks with financial institutions for funding heightened fears of increased financial costs, causing a notable selloff and plunging CPALL’s stock to its lowest in more than eight years.
Moreover, market regulators’ move to consider adjusting market weights by capping at 10%, with Delta Electronics (Thailand) at the forefront due to its large index weight (currently at 13% in SET50), sparked further selloffs possibly from fund managers making prompt portfolio adjustment before the rules kick in. The resultant decline underscored the volatile state of the SET Index.
The recent decline this week, despite other markets moving in positive direction, showed that investors are now in a panic sell off mode, trying to salvage what they can get from the Thai market.
While the Thai stock market has undoubtedly faced considerable challenges, encapsulating financial, political, and corporate crises, this period of turmoil also brings forth potential opportunities for strategic recalibrations. Market corrections may pave the way for a more stable and resilient bourse as it is fundamentally deemed a proper move to invest when the valuation is attractive.
The main issue for Thai stocks did not lie with its EPS fundamental rating that is within the range above 90, but with a high PE ratio. As the market lacks premium from growth, analysts are starting to de-rate PE of fundamentally good stocks.
The economic growth for the final quarter in 2024 could be the light at the end of the tunnel at this point. Scheduled to be announced on 17 February, market consensus is expecting a 3.7% growth in 4Q24, while the Finance Ministry expects as much as 4.3%.
As the regulatory adjustments proceed and corporate governance concerns are addressed, there is optimism that Thailand’s stock market could emerge stronger, attracting investors with a newfound commitment to transparency and sustainable growth.
