Bangkok: SCB CIO anticipates short-term volatility in the markets due to the ongoing Iran-Iran conflict. The Middle East situation is not expected to escalate into a regional war, but risky assets may continue to experience volatility. Oil and gold prices have already surged as investors seek safe havens. The company advises investors to consider corrections as opportunities to accumulate fundamentally strong equity stocks, high-quality short-to-medium-term U.S. bonds, and short-term Thai bonds, which are supported by lower interest rates.
According to Thai News Agency, Mr. Sorachai Sunetta, CFA, Deputy Head of High Net Worth and Affluent Banking at Siam Commercial Bank, highlighted the potential for escalation if Iran prolongs its retaliation following the loss of its Supreme Leader. This could exert short-term pressure on risky assets and drive commodity prices higher, including gold and oil. While SCB CIO does not expect the conflict to develop into a regional war, the economic and inflationary impacts remain limited for now. However, the situation in the Strait of Hormuz should be closely monitored.
SCB CIO outlines three possible scenarios: a base case with a 65% probability where a short-term violent clash leads to negotiations, a best case with a 25% probability resulting in a pro-Western government and downward correction of oil prices, and a worst case with a 10% probability involving a prolonged war and significant oil price surge. Despite the geopolitical risks, SCB CIO suggests not selling stocks based on the current situation, due to its limited impact. Instead, they recommend accumulating stocks with strong fundamentals for both long-term and short-term portfolios, especially for investors with moderate to high risk tolerance.
In the Thai stock market, energy stocks provide short-term support, but the market remains susceptible to volatility and profit-taking. The SET Index has risen 21.3% year-to-date, increasing the potential for profit-taking. Investors holding Thai stocks are advised to maintain their positions and wait for index recovery before selling. Diversification into Asian stock markets with better earnings prospects, such as Japan and South Korea, through mutual funds is suggested for those who can tolerate exchange rate risk.
The bond market outlook suggests a short-term decline in US bond yields, driven by a risk-off environment. High-quality US Treasury and corporate bonds in the short to medium term are recommended, along with short-term investments in Thai bonds due to lower interest rates following a recent policy rate cut. For commodities like gold and silver, while short-term price spikes are likely due to the conflict, a resolution could lead to price decreases. Therefore, SCB CIO advises holding these investments in proportion to risk tolerance and accumulating only during price dips.