Easing domestic political uncertainties and the increased possibility of US interest rate cuts could lead to a resurgence of foreign capital inflows starting next month, potentially pushing the Thai stock market back to around 1,500 points by next year, according to analysts.
Wikij Tirawannarat, senior vice-president of Bualuang Securities, noted that a recent uptick in the Stock Exchange of Thailand (SET) index was fueled by a clearer political landscape and expectations of interest rate cuts in the West.
Last Friday, Thailand experienced net buying of 2.84 billion baht in stocks, marking the largest single-day net purchase in three months. The trading also included 2.66 billion baht through non-voting depository receipts and 15,000 net long positions on the Thailand Futures Exchange, according to Asia Plus Securities.
“As the interest rate differential narrows, funds have begun flowing into regional stock markets, including Thailand, Indonesia, and the Philippines, which has contributed to the recent appreciation of the baht,” Mr. Wikij explained.
Kasem Prunratanamala, head of research at CGS International Securities Thailand (CGSI), indicated that the brokerage expects foreign investments to return next month as political uncertainties ease and due to the significant underperformance of the Thai market compared to its regional counterparts.
“We anticipate that the coalition parties will remain united and that the new government will be officially formed in the coming weeks. With political uncertainties diminishing, the Thai market is expected to continue its upward trajectory,” he said.
“Investors are likely to shift their focus away from defensive sectors and those relying on external conditions to domestic sectors that have significantly underperformed yet exhibit strong fundamentals.”
CGSI has maintained its year-end SET index target at 1,420 points, with upside risks including aggressive rate cuts by the US Federal Reserve, the launch of the 150-billion-baht Vayupak Fund expected in the third quarter, and the introduction of new Thai ESG funds.
Potential downside risks include ongoing political uncertainties, delays in the rollout of the digital wallet, and increased capital outflows, according to Mr. Kasem.
Weerawat Virojphoka, director of securities analysis at Finansia Syrus Securities, stated that greater clarity regarding Thailand’s political environment and optimism that a new cabinet will implement economic stimulus measures could elevate the SET index to 1,470 points by the end of the year, with a target of reaching 1,500 points next year.
However, concerns remain regarding the US economy and the potential for aggressive rate cuts by the Fed, Mr. Weerawat added, noting that there is a chance Thai interest rates may also be reduced later this year.
