2 days ago
Rate cut, policy easing set to renew investment
The Bank of Thailand's policy rate cut of 25 basis points (bps) to 1.50% and targeted easing measures are set to reignite the investment cycle, propelling the Stock Exchange of Thailand (SET) index towards 1,370 points by year-end, according to analysts.
Koraphat Vorachet, assistant managing director and head of research at Krungsri Securities (KSS), said the start of "a policy-led re-rating phase" will likely shift domestic liquidity from low-yield Thai government bonds into equities.
He said this shift is not only about reducing borrowing costs, but also recalibrating Thailand's economic engine.
In the near term, small businesses and households will benefit from cheaper funding, while the yield curve should lead to rising bond prices, and risk premiums in capital markets may compress, supporting real estate investment trusts (REITs) and utilities, said Mr Koraphat.
In the medium term, banks could face net interest margin pressure, though asset quality should improve as purchasing power recovers, noted KSS.
In the longer term, the Monetary Policy Committee retains scope to ease further if consumption remains soft.
KSS estimates every 25bps cut could lift the SET index by 50-55 points under current yield and equity risk premium conditions, he said.
Global macro tailwinds are reinforcing this view, with the Federal Reserve expected to cut rates in September, most likely by 25bps to 4.00-4.25%, with a 6% chance of a deeper 50bps cut, after labour market data softened and inflation pressures remained contained, noted the brokerage.
A stronger baht at 32.3 per dollar is attracting fund flows into Asia's emerging markets, favouring baht-hedged strategies.
In China, a 1-trillion-yuan stimulus package, roughly 0.7% of GDP, should help basic materials and chemicals bottom out, benefiting low-cost domestic producers, said Mr Koraphat.
Major beneficiaries of the rate cut include power producers, banks and consumption-play stocks. REITs and infrastructure assets will also attract inflows given improved free cash flow visibility, noted KSS.
Siam Commercial Bank (SCB), Krungthai Bank (KTB) and Kasikornbank (KBANK) could benefit from lower credit costs and improved SME and household loan quality.
Companies such as Krungthai Card (KTC) and Muangthai Capital (MTC) should see reduced funding costs, while AP Thailand (AP) and CPALL will gain from lower borrowing costs and a soft-landing economic scenario, he said.
Upside catalysts include an accelerated Fed rate cut, a recovery in export and consumption, and additional Chinese stimulus, noted KSS, with risks from weaker tourism, trade shocks, policy delays and oil price spikes.
Finansia Syrus Securities sees Fed policy as the main driver of Thai equities, projecting a September cut and maintaining its constructive outlook.
Locally, Finansia expects another rate cut of 25bps before year-end to further support equities.
Key near-term events include the 2026 budget readings during Aug 13-15 and the Constitutional Court's ruling on the prime minister's audio clip on Aug 29, both potential volatility triggers.
In the medium to long term, the brokerage expects the SET to retest 1,280-1,300 points before breaking higher. Laggard consumer staples, such as healthcare, power producers, finance, retail and construction, are seen outperforming.
