Thai investors should focus on defensive stocks, particularly energy producers and banks with strong company-specific catalysts, as escalating geopolitical tensions and expectations of prolonged high interest rates reshape market sentiment, according to analysts.
Asia Plus Securities (ASPS) recommends stocks that stand to benefit directly from rising oil prices or prolonged higher interest rates, highlighting PTT Exploration and Production (PTTEP), Krungthai Bank (KTB) and SCGJWD Logistics (SJWD) as its top picks.
PTTEP is expected to gain from soaring crude oil prices driven by the escalating Middle East conflict, supported by strong second-quarter earnings and an attractive dividend outlook.
KTB is favoured as high interest rates support net interest margins, underpinned by solid asset quality and a strong balance sheet.
SJWD is expected to post a clear earnings recovery in the second half, with analysts seeing significant upside from current levels.
The US Federal Reserve adopted a more hawkish stance last week, with markets pricing in a 57% chance of a rate hike in September after three members voted for an increase.
Higher oil prices linked to geopolitical tensions have also revived inflation concerns.
In addition, the worsening conflict in the Middle East has heightened fears of disruptions to key oil shipping routes through the Strait of Hormuz and the Red Sea, pushing crude prices higher and strengthening earnings prospects for upstream energy producers such as PTTEP.
Meanwhile, global stocks related to artificial intelligence (AI) have come under heavy pressure.
The Nasdaq 100 fell more than 10% recently, while semiconductor shares dipped around 25% amid concerns over AI spending and weaker second-quarter earnings than expected from several technology companies.
The combined impact pushed the US 30-year Treasury yield to 5.21%, its highest level in 19 years, while strengthening the dollar as investors sought safe-haven assets.
ASPS warned Thai electronics stocks could remain under pressure, in line with weakness in global technology shares.
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According to Usanee Liurut, senior equity analyst at FSS International Investment Advisory (FSSIA), Thai bank shares continue to attract foreign investors because of their resilient earnings despite modest loan growth.
Banks have diversified income through fee-based businesses, wealth management and investment-related revenue while improving asset quality, reducing pressure from non-performing loans and credit costs.
Most banks are trading at around one time price-to-book value, leaving room for further upside as earnings expand, noted the brokerage.
Looking ahead, Ms Usanee expects government investment, economic stimulus measures and continued foreign direct investment to support loan demand.
Stable or higher interest rates would benefit large banks such as Bangkok Bank (BBL) and KTB through stronger net interest margins.
Banks' solid capital positions and continued cost discipline should support higher dividend payouts and improve returns on equity, she said.
FSSIA recommends the banking sector, with BBL and KTB as its top picks, while giving a "buy" rating to Kasikornbank (KBANK), SCB X (SCB), TMBThanachart Bank (TTB) and Kiatnakin Phatra Bank (KKP).
The firm maintains a "hold" recommendation on Tisco Financial Group (TISCO) due to its limited share price upside despite an attractive dividend yield.
