2 days ago
Thai markets to stay volatile for rest of year
Bualuang Securities (BLS) expects Thailand's stock market to remain volatile in the second half of 2025 as domestic and external headwinds continue to weigh on sentiment, though a recovery is possible in the final quarter that could lift the Thai index to 1,280 points by year-end.
The Stock Exchange of Thailand (SET) index contracted by 10.1% during the first seven months of the year as investors reacted to political uncertainty, weak domestic demand, and concerns over global growth, said Chaiyaporn Nompitakcharoen, managing director for the non-institutional broking group at BLS.
The outlook for the second half remains clouded by several challenges, including US import tariffs, high household debt levels, sluggish global activity, and the limited impact of government stimulus measures due to unstable political conditions, said Mr Chaiyaporn.
Reflecting these risks, BLS downgraded its 2025 earnings-per-share forecast for Thai listed companies from 92 baht to 82 baht, following weaker first-half financial results than projected.
Thai equities have already corrected to levels comparable with past crises, including the Lehman Brothers collapse and the 1997 Asian financial crisis, while they are below Covid-19 lows, suggesting limited downside, noted the brokerage.
However, the possibility of the SET index falling back to a range of 1,050-1,080 is considered unlikely.
"BLS expects the economy to bottom out in the third quarter before showing signs of recovery in the fourth, assuming political tensions do not escalate and US tariffs prove less damaging than initially feared," said Mr Chaiyaporn.
With US import tariffs for Thai goods similar to its Southeast Asian peers, the impact "is manageable", he said.
BLS projects the SET index could gradually climb back to 1,280 points by December, based on 6.6% earnings growth and an average price-to-earnings ratio of 15.7 times.
The firm recommends investors take advantage of pullbacks to accumulate shares, with a focus on global play sectors such as petrochemicals, electronics, and animal feed producers, which are trading at attractive valuations and are better positioned to benefit from external demand.
In contrast, domestic play stocks remain under pressure from weak local consumption, with the hardest-hit industries real estate, construction, hire-purchase finance, personal loans and media. Banks, convenience stores, hospitals and tourism are expected to face only moderate headwinds, according to BLS.
On the external front, Mr Chaiyaporn said the US economy could slow if import tariffs fuel inflation, a scenario that may prompt the Federal Reserve to cut interest rates by 50 basis points in one or two moves in the second half of the year, followed by possible further easing in 2026.
Meanwhile, the Bank of Thailand is expected to lower its policy rate once more in the second half of 2025 and again in 2026, consistent with low domestic inflation near 1%.
BLS strategist Piriyapon Kongvanich advised investors to overweight fixed income at 56% of the portfolio, significantly above the typical 20%, to capture benefits from the expected rate-cutting cycle and to reduce portfolio volatility. The remainder should comprise equities and gold, with the latter at less than 10% and stock exposure diversified across both Thai and US markets, according to the brokerage. For investors seeking overseas opportunities, BLS pointed to depositary receipts as an attractive alternative.
