Tisco Securities is warning that global stocks could slide in the near future as disappointing corporate profits and shrinking liquidity pressure market sentiment, with investors urged to hold more cash until the market correction.
Tisco expects global stock markets to decline by around 10-15% from the current level, said Komsorn Prakobphol, head of Tisco's Economic Strategy Unit.
"The S&P 500 index is currently higher than 4,000 points, with a market price-to-earnings ratio of 18 times," he said.
"At the current level, there are limited opportunities for the market to continue its surge."
Mr Komsorn said downside risks emerged when profit forecasts of listed companies were revised down for various reasons, including rising financing costs as a result of the US Federal Reserve's interest rate hikes.
Commercial banks have also been under pressure to raise rates as deposits have continued to flow out of the banking sector.
Meanwhile, liquidity in the financial sector has been squeezed, prompting banks to be more cautious about their lending, which may affect the broader economy, he said.
Tisco forecasts liquidity in the financial system to decline further, partly because the Fed will continue to pull out $100 billion of liquidity in quantitative tightening each month, said Mr Komsorn.
The US Congress is expected to agree on a proposal to increase the debt ceiling between June and July.
Once approved, the US government would start to sell bonds and borrow large amounts of money from the financial market, which would further absorb liquidity from the market, he said.
Meanwhile, Kasikorn Asset Management (KAsset) sees global interest rates nearing a peak.
"In the next phase, we could see a downward trend in interest rates," said KAsset chief investment officer Chatchai Saritapirak.
The Bank of Thailand is likely to gradually adjust its interest rates to a normal level, with an expected slight increase from the current rate, he said.
However, the current Thai bond market already reflects these potential rate hikes, said Mr Chatchai.
"If the Bank of Thailand raises rates again, the impact on the Thai bond market will be limited," he said.
KAsset recommends buying long-term fixed-income funds that mainly invest in quality Thai bonds, including the K-FIXEDPLUS-A fund.
