China’s economic stimulus is expected to indirectly benefit several Thai industries and foster positive sentiment in the capital and money markets, potentially lifting the Thai stock index to 1,500 points, according to analysts.
The Kasikorn Research Center (K-Research) indicated that China’s stimulus consists of three main components: measures to support the stock market, initiatives for the real estate sector, and cuts to interest rates.
“A significant issue within the Chinese economy is low consumer confidence,” the think tank stated. “The recent measures still lack a crucial catalyst for domestic consumption, which is essential for economic recovery.”
When compared to the challenges facing China, the magnitude of the current measures is relatively small. In 2008, the Chinese government implemented a stimulus package worth 4 trillion yuan, accounting for 15% of GDP. In contrast, the latest stimulus is valued at only 3.3% of GDP, not including the effects of interest rate cuts and real estate initiatives.
Although the measures aimed at supporting the stock market may enhance investment sentiment in the short term, K-Research noted that the long-term effects will depend on improvements in China’s economic fundamentals.
Pi Securities forecasted that numerous Thai industries, such as petrochemicals, packaging, tourism, and oil, will benefit from China’s economic stimulus. For instance, the petrochemical sector is expected to see improved margins in the near term.
Asia Plus Securities (ASPS) observed that the stimulus measures have allowed stock markets in China and Hong Kong to outperform others this week. They believe these measures will help China achieve its GDP growth target of 5% for this year.
ASPS also anticipates that these initiatives will push the Stock Exchange of Thailand index above 1,500 points.
“If the Chinese economy rebounds, it will positively impact Thailand’s growth, as China is Thailand’s second-largest export market after the U.S., accounting for 15.5% of the total export value,” the brokerage explained in a research note.
Thai products represent 1.83% of China’s total imports, placing Thailand as the 18th largest supplier. Furthermore, a healthier economy in China is likely to result in an increase in Chinese tourists visiting Thailand.
ASPS recommends investing in stocks poised to benefit from the recovery of the Chinese economy, particularly in the tourism, hotel, and logistics sectors. Suggested companies include Airports of Thailand (AOT), SCGJWD Logistics (SJWD), Erawan Group (ERW), Central Plaza Hotel (CENTEL), Minor International (MINT), and Triple I Logistics (III).
Additionally, electronic component manufacturers such as Hana Microelectronics (HANA), KCE Electronics (KCE), and Delta Electronics (Thailand) (DELTA) are also recommended. Other sectors expected to see benefits include property development, construction materials, energy, food and beverages, and rubber.
