Bangkok, Trinity points out that the Thai economy and capital market are stronger after the Tom Yum Kung crisis and the 27th anniversary of the baht’s floatation, but household debt is soaring. It believes that capital will flow in in the fourth quarter after the Fed cuts interest rates. It expects the Thai stock index in the second half of 2024 to move within the SET range of 1,240-1,430 points. The baht will be stable at 37 baht.
Dr. Wisit Ongpipattanakul, Chief Executive Officer of Trinity Wattana Public Company Limited, revealed that on the 27th anniversary of the 1997 Tom Yum Kung crisis and the anniversary of the floating of the baht on July 2, 1997, the Thai economy and capital market have become much stronger. This can be seen from the market capitalization to GDP, which has increased from 24% to 97% of the country’s GDP. The debt instrument market has developed significantly from less than a trillion baht in 1997 to 17 trillion baht or 95% of GDP at present. The fundraising picture is more balanced
in debt instruments, equity instruments, and bank loans, while reserves to GDP have strengthened to 44% of GDP, compared to 18% of GDP in 1997. The current balance is strong (some years up to 10% of GDP), but the capital account balance has begun to weaken since 2013.
Corporate debt has strengthened from 175% of GDP to 95% of GDP in 2009 before increasing to 197% of GDP in mid-2024 due to the Covid-19 situation causing the corporate sector to incur more debt. Net profit per share has improved from a net loss in 2007 to the current level of 80-90 baht per share.
For the baht, since the announcement of the float from 25 baht/US dollar, it has weakened to 54 baht/US dollar. It has currently adjusted better, having previously strengthened to around 27 baht after the subprime crisis because there was money flowing from the US. The baht has weakened partly because the US has a policy of raising interest rates for a long time. It is predicted that the Fed will reduce interest rates at least once or may not reduce
them at all, while in Europe, interest rates have been reduced, resulting in a wider interest rate gap, causing the currencies of ASEAN countries to begin to weaken. From the data on the Real Effective Exchange Rate, which is still in a balanced state, it is believed that the baht will be stable at around 37 baht.
“Although the overall economy is stronger than during the crisis, some sectors are still structurally weaker, especially household debt, which has increased from 40% of GDP to the current 91% of GDP, leading to a weakening of household savings,” said Dr. Wisit.
For the trading value of the Thai capital market, when compared to the Market Cap. of the stock market, it is at its lowest level in 20 years. Thai individual investors have decreased from 47% to 31%. It is believed that the Thai capital market in the first half of 2024 has passed its worst period in terms of capital outflows after capital outflows in the first and second quarters of more than 110 billion baht. The main reason is the gap be
tween the yields of US and Thai bonds, which is quite high, causing some money to be invested in US bonds, both from foreigners selling and Thai capital through foreign currency deposit accounts (FCD) that flowed out to invest in the United States of more than 820 billion baht.
Fund Flow, both buying and selling, of foreign investors will be thin in Q3 throughout the region as most of the money is still waiting for signals of interest rate cuts from the US Federal Reserve (Fed) and the US elections. It is expected that Fund Flow will start to flow in at the end of Q4 when the Fed’s interest rate cut is clear and it is the high season for Thai tourism.
Dr. Wisit talked about the investment trend in the second half of 2024. In the short term, 1-3 months from now, the US dollar will continue to strengthen due to the gap between the US policy interest rate and other central banks around the world that is still high. In addition, it is expected that the Fed may cut the policy interest rate by 0.25% or maintain t
he interest rate. It is expected that the Monetary Policy Committee (MPC) will maintain the interest rate throughout the year. While the risk of political uncertainty, if it causes the disbursement of the 2024 budget to be delayed, it will lead to a decrease in net profit per share of the Thai stock market. And the world stock market often adjusts down by more than 10% on average 4 months before the US presidential election (statistics from the past 25 elections).
The stock market in Q3 will be driven by institutional investors. We see SET movement for the rest of the year at 1240-1430, where 1240 (assuming PE 11.9x and consensus EPS 2025 at 107 baht per share and PE at 13.8x) sees the Thai stock market as K shape and sector selection, recommending investment in sectors that emphasize profit growth, namely electronics, food, telecommunications, power plants and hospitals.
Dr. Wisit believes that foreign investors may start to be interested in Thai stocks when the Earning Yield Gap of the Thai stock market,
when compared to the 10-year Bond Yield of the United States, which has an average of 3.24% or the SET Index level of 1,250, and sees the Thai stock market having Fund Flow flowing in at the end of the 4th quarter, especially bank stocks with high dividends.
Source: Thai News Agency
