After defying the "Sell in May" trend, the Stock Exchange of Thailand (SET) in June continued to rise, helped by the US-Iran ceasefire.
At the start of June, more funds headed to Thailand in response to news that MSCI might downgrade Indonesia from emerging to "frontier" market status because of transparency and governance issues. The influential index compiler subsequently deferred a decision until November.
After the US and Iran reached a 60-day ceasefire, the benchmark West Texas Intermediate oil price dropped 6.2%. The SET index peaked at 1,609.71 points as ships finally started to exit the Strait of Hormuz and oil prices decreased steadily, reaching pre-war levels late in the month.
The SET traded sideways near the end of June, with a sell-off in tech stocks in the US market triggering similar activity in Asia and Thailand. The SET closed June at 1,591.24 points, up 1.5% from the month before, with average daily turnover rising 12% to 73.9 billion baht.
In the first week of July, the tech sector declined by 4.3%, while other sectors mostly remained positive. The leaders were finance (+6.5%) and banks (+4.9%), which we believe is in line with our view that the dominance of tech stocks has ended, especially for the Thai market where listed tech firms are mostly hardware suppliers, unlike the high technology in the US.
We believe more sector rotation will happen this month. Following the ceasefire, oil prices have decreased and other real sectors that were hampered by the war should recover. Underperforming sectors include tourism, healthcare, commerce and banks.
The banking sector should be a standout, as the war ended the declining interest rate cycle, sentiment has improved and fund flows have started to kick in. With high dividend yields another lure, positive sentiment has lifted many banks' share prices to highs not seen for many years.
The SET has hovered around 1,600 points this month, peaking at 1,621.81 points. Sentiment was boosted after the annualised inflation rate for June was reported at 2.4%, down from 2.7% in May, indicating the impact from high oil prices has peaked. With oil prices back around pre-war levels, economic conditions are expected to gradually improve.
In addition, the "Thais Help Thais Plus" co-payment scheme started in June and runs until Sept 30, which should improve consumer spending and economic conditions.
The SET is one of the best-performing equity markets in the world, gaining 26% this year. We expect the strong performance to continue in July.
JULY PICKS
We believe sector rotation towards recovery-themed stocks has started. Our picks for this month include Amata Corp (AMATA), Bangkok Dusit Medical Services (BDMS), Central Retail Corp (CRC) and PTT.
Foreign direct investment in Thailand grew significantly in the first quarter. We believe positive sentiment should persist throughout the year. AMATA's industrial land sales in Thailand and Vietnam have shown good prospects. The land sales target for 2026 of 2,800 rai appears well within reach. We believe second-half profit should be better than in the first half, and the firm has an annual dividend yield of 5%.
Healthcare was affected by the US-Iran war, and we expect it to recover as tensions ease. BDMS should benefit from the return of Middle East patients, including from Qatar, the UAE and Oman. Management maintained its target to increase sales by 2-4% year-on-year. The BDMS WellEra project is expected to start presales in the fourth quarter of 2026, with transfers expected by 2030. This project in a prime area of Bangkok next to Lumpini Park includes wellness clinics, a hotel, and a branded residential and commercial area with average selling prices of 400,000 baht per square metre. Healthcare is a defensive sector that is lagging the SET, while BDMS has a dividend yield of 4% per year.
CRC has recorded a 30% increase for the year-to-date following the divestments of its last European holdings to other Central-affiliated companies earlier in the year to focus on Asia, especially Vietnam. Another divestment from Nguyen Kim in Vietnam was to concentrate on the food segment, where CRC plans to add 5-7 branches of Go! Hypermarkets. For Thailand, the company is renovating department stores and plans to open 8-10 Thai Watsadu branches. Same-store sales growth in April and May was in the low single digits, which is considered positive during a war. We believe its second-quarter profit should be good.
PTT should benefit from its refinery operations this year. We expect refinery margins to increase significantly year-on-year in 2026. Although crude premiums have increased significantly as well, we believe the net gain should be high for this year. Elevated oil prices should also benefit PTT Exploration and Production this year, allowing the parent to prosper. PTT is a high-dividend stock with a yield of more than 6% per year. With more fund inflows expected into the SET, PTT should be a target for foreign investors.
