Momentum test ahead for improving SET
Easing short-term worries over US tariffs, now that Thailand has secured a rate of 19%, not much different from that of key competitors.
Clearer direction on policy interest rate cuts.
Easing tensions at the Thai-Cambodia border, though the situation has to be monitored closely.
Not bad second-quarter earnings, with less than 25% of companies posting weaker-than-expected results -- less than the average.
Fewer cases of earnings downgrades, from 1-3% a month to less than 1%, reflecting that the downward revision cycle is ending. In fact, there seem to be signs of upward revisions in many more sectors.
Market impact from rises in individual stocks, most notably DELTA and THAI. The latter continued to soar after trade resumed on Aug 4, until its market capitalisation reached a peak on par with Singapore Airlines at close to 500 billion baht.One factor that has driven THAI beyond its fundamentals is speculation about accumulation by funds. Many will be obliged to have the stock in their portfolios if it is added to the SET50 in the next round of index rebalancing -- especially index-linked passive funds. As well, demand is boosted by tight available supply as more than 93% of the shares are still locked up during a silent period.
Speculation on further equity-related inflows in anticipation of potential reweighting of the Thai market by MSCI or FTSE could attract more passive funds, also keeping the SET in bullish mode.
At this point, the SET has already hit its target at 1,280 points and we expect the benchmark to consolidate around 1,270 to 1,280 to cool down and sustain momentum. This could imply stock rotation -- liquidity stays in the market but in different stocks. In this case, we could see investors shifting from firms that have already rallied to others that have yet to follow suit, particularly key sectors such as petrochemicals which used to lead the market upward.
However, two key stocks that have not yet been bought back, in the power and retail sectors, have faced pressures from specific headwinds. For individual plays in these two sectors, we see a fair chance that fund flows will return to GULF and CPALL, which have faced less pressure than their respective sectoral peers.
Among the positive factors that could help sentiment in the Thai market this week:
Monitor post-results analysts' meetings, eyeing potential upward revisions of earnings forecasts for certain stocks not exposed to substantial pressure.
Easing tensions on the geopolitical front. Even though the Trump-Putin summit was inconclusive, it has set the stage by prompting more talks among all parties involved in seeking an end to the war in Ukraine.
Thai economic indicators for July, the final month with a 10% US tariff rate. After July, expect to see a slowdown in exports to the US, after months of increased shipments to beat higher tariffs.
Clearer rate cut direction and signals from the incoming Bank of Thailand governor, who weighs economic conditions in parallel with financial system stability, which the market tends to view more positively.
Among the negative factors to be aware of:
The Thai-Cambodia conflict remains a sensitive issue. Besides the impact on specific Cambodia-focused stocks such as CBG, market participants are starting to focus on the sustained pressure faced by the government.
Political uncertainties that include the court ruling on the PM's ethics case on Aug 29, a fragile coalition and expectations of more anti-government protests. It has yet to be seen how the government will adjust to manage public expectations.
Reality check time as impact of the Trump tariffs on the US and global economies becomes clearer. Investors will seek more details of US inflation, particularly the extent of price increases for imported goods, and the magnitude of declines in Chinese exports and manufacturing.
All in all, uncertainties on the global or domestic levels could drive liquidity back towards safe havens again.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Bangkok Post
12 hours ago
- Bangkok Post
Michelin-starred crab omelette eatery fined B2,000
The Michelin-starred Raan Jay Fai restaurant in Bangkok has been fined 2,000 baht for failing to display a 4,000-baht price tag for a special version of its famous crabmeat omelette, the Department of Internal Trade said on Wednesday. Department officials as well as consumer protection officials and police went to the restaurant on Mahachai Road in Phra Nakhon district to verify a recent complaint by a Thai influencer who said her group was charged 4,000 baht for the dish even though the menu clearly showed only a 1,500-baht price. The complaint went viral online and was viewed 8 million times. Officials confirmed that only the standard price for the omelette dish was shown and there was no sign anywhere of a 4,000-baht version, which was said to contain higher-quality crabmeat. The restaurant was fined 2,000 baht under the Prices of Goods and Services Act, which requires prices of products and services to be clearly displayed. The maximum fine is 10,000 baht. It was reported that the owner agreed to improve her menus, while the affected party did not seek a refund or any compensation. Jay Fai is owned and still operated by Supinya 'Jay Fai' Junsuta, 82. She won her first Michelin star in 2017 and has retained the award ever since.
Bangkok Post
13 hours ago
- Bangkok Post
More easing only if growth outlook dims: Bank of Thailand
Thailand's central bank would need to see a 'significant material deterioration' in its economic growth outlook, or face unexpected shocks, to justify additional rate cuts beyond the three reductions it has made this year, a top official said. The Bank of Thailand's (BoT) monetary policy stance remains accommodative, and the rate panel has considered hits to growth from US tariffs starting the second half, Deputy Governor Piti Disyatat said in a Bloomberg TV interview on Wednesday. Mr Piti, who is part of the BoT's seven-member Monetary Policy Committee (MPC), said a quarter-point cut last week factored in tight financial conditions and greater clarity on the trade front following the settlement of US tariffs. The policymakers voted unanimously last week to cut the benchmark rate to 1.5% — bringing the total reductions to 100 basis points since October — to help ease the burden for export-reliant businesses facing hits from US tariffs. Still, many analysts expect the easing to continue, given a weak economic backdrop and negative consumer prices. 'It would have to be a substantial revision in the growth outlook to the downside, or some kind of unexpected shock that is not right now in the forecast' for the BoT to cut rates again, Mr Piti said. 'And right now the contours of the economic development have been broadly in line with what we have anticipated.' Standard Chartered Plc expected a 50-basis-point cut at the next meeting on Oct 8, while Nomura Holdings forecast the terminal rate to go lower than 1%. Domestic political uncertainty, recent dovish comments from the MPC, incoming BoT Governor Vitai Ratanakorn's potentially dovish stance and likely calls for rate cuts by the government are among the reasons backing analysts' call for further easing. The central bank does not have much room left for easing, Mr Piti said, adding that BoT's policy rate has been below 1.5% only on three occasions in the past 25 years, with two of them during the global financial crisis. 'So, 1.5% is quite a low rate for Thailand historically. And the second thing that is very important to note is that the slowdown in the economy, or the sluggish growth for the past few years, is due mainly to structural factors,' Mr Piti said. 'No constraint' 'Monetary policy can only do so much, and I think the MPC wanted to make sure that monetary policy is not a constraint on growth,' he added. Data released on Monday showed Thai economic growth slowed to 2.8% in the second quarter, from 3.2% in the prior three months. The outstanding loan portfolio in the second quarter also contracted for a fourth consecutive quarter as banks remained cautious in lending to small businesses and consumers while companies stayed focused on debt deleveraging amid a weak economic outlook. Headline inflation has been in negative territory since April and consistently undershot the central bank's 1% to 3% target range throughout this year. The core gauge, which strips out volatile fuel and fresh food prices, has cooled for two straight months. The BoT easing last week prompted major Thai banks to match the central bank's reduction, marking the first time in the current easing cycle that lenders have fully passed on a BoT rate cut, compared to around 40% during the previous three moves. The Thai baht has surged around 5% this year, prompting some ministers and business groups to call for the central bank to weaken the currency to boost exports and tourism — the nation's biggest drivers of growth. Mr Piti said the BoT does not target any particular level for the local currency and has intervened in the market from time to time to ease excessive volatility triggered by non-fundamental factors.
Bangkok Post
15 hours ago
- Bangkok Post
Cabinet approves 10,000 Sri Lankan workers to replace Cambodians
Thailand's cabinet has approved the hiring of 10,000 Sri Lankan workers as it tries to address a labour shortage caused by Cambodian workers returning home in the wake of a deadly border conflict between the two countries, a Thai senior official said on Tuesday. Thailand's ageing population and shrinking workforce has forced it to rely on at least 3 million registered foreign labourers across the agriculture, construction, and manufacturing sectors, data from the International Labour Organisation (ILO) showed. More than 30,000 workers from Sri Lanka have already registered and 10,000 will be sent to Thailand in the first stage, Labour Minister Pongkawin Jungrungruangkit told reporters, adding that it would also allow workers from Nepal, Bangladesh, Indonesia and the Philippines to apply. A long border dispute between Thailand and Cambodia last month boiled over into the worst fighting in decades, with at least 43 people killed and over 300,000 displaced on both sides of the border. The two Southeast Asian nations have now agreed a fragile ceasefire agreement. Before the conflict began, over 520,000 Cambodians worked in Thailand, accounting for 12% of the country's foreign workforce, according to official data. About 400,000 Cambodians working in Thailand have left the country during the fighting, according to the Cambodian government. Sri Lanka, which has emerged as a key source of replacement labour, saw a record 314,786 citizens leave for overseas employment in 2024, official data showed, with economic hardship pushing many to look for work overseas. The Middle East was the primary destination, and many also sought jobs in South Korea and Japan. Sri Lankan migrant workers are the largest source of foreign exchange for the South Asian island nation. However, a Thai labour expert warned that the plan to bring in unskilled workers from Sri Lanka is not the right solution to the exodus of Cambodian labourers and it will backfire on Thailand in the long run.
