The Stock Exchange of Thailand continued to drift lower this week as investors unloaded various blue chips in a rotation pattern.
Many stocks were pressured by specific factors such as concern over power bills and political parties' promises to reduce electricity costs. SCB and KBANK fell amid provisioning worries over a potential debt default by STARK. OSP and CBG faced pressure as they are unable to raise selling prices despite a sugar tax hike. JMART and JMT retreated on their removal from the SET50 and fears of potential forced sales by investors, while TOP, PTTGC and BANPU were affected by jitters over the delayed recovery in the global economy.
However, better than expected bank earnings released during the week drove KTB and TTB to defy the downbeat market trend. It should also be noted that investors shifted into big caps with stronger fundamentals such as hotels and retailers.
We expect selling pressure in selected sectors and individual stocks to subside in the coming week. Stocks with overhanging issues (such as global plays, agricultural and major power producers) will likely rebound modestly if inconsistently.
However, the current downtrend should not last much longer and the magnitude will not be severe. Thus, there is no need to clear one's portfolio and hold cash as in February and March. Stock selection will be more challenging but we continue to emphasise selected individual stocks.
We expect the SET Index to remain rangebound between 1,550 and 1,590 points. Any fresh positive catalyst could lift the target range while any consolidation should not be as steep as before. Local politics will have a relatively bigger influence on market direction as parties prepare for the final push in the campaign for the May 14 general election.
POSITIVE FACTORS
Our focus is now on the election. The campaigns of various political parties have common themes such as short-term stimulus (positive for commerce, restaurants and tourism); cost of living, debt or interest burden cuts (positive for hire-purchase lenders, and for banks if state subsidies are involved); general construction projects (positive for contractors); and new projects such as a land bridge, which would also benefit logistics and industrial estate businesses.
Some parties are also promoting policies that will strengthen economic fundamentals in the long run. Policies that would boost the infrastructure and technology sectors could benefit data centres, with AI and blockchain applications supporting new S-curve ventures in the ICT field.
Green tech is another area many parties are emphasising. Sustainable and environment-friendly businesses will be highlights as they align with the policies of global firms, requiring Thai counterparts to adopt the same high standards.
Potential gainers from a green economy push include clean energy (GUNKUL, WHAUP); electric vehicles (EA, NEX, DELTA, HANA, KCE, AH, MTW, TAKUNI, NDR, HFT, OTO); EV infrastructure (EA, OR, FORTH); and climate tech standardisation such as carbon credit innovation (DITTO, TEAMG, BRR and OTO). We recommend that investors start to monitor these stocks, which will likely become outstanding regardless of who leads the new government.
Although worries over global economic conditions tend to weigh less on Thai shares than those in some other markets, any fresh negative factors could exert more influence on market direction.
Among those factors are implications that the end of the interest rate up cycle and slowing economic indicators will lead to recession (instead of lower inflation and economic normalisation as previously expected), as well as higher provisioning costs among banks in the West.
Despite the relatively calmer situation of late, geopolitical risk remains crucial and any intensified military operations could reignite market jitters.
Meanwhile, first-quarter earnings results for blue chips in the following weeks will indicate the performance outlook of stocks in the real sector. Investors are looking for more hopeful signs after the outlook for some sectors, such as agricultural and building materials trading, has been downgraded.
