Global stock investments, including those in Thailand, continue to face pressure due to the expected prolongation of high US interest rates, leading to capital outflows from emerging markets, reports the Stock Exchange of Thailand (SET).
Senior Executive Vice-President of the SET, Soraphol Tulayasathien, highlighted reasons behind the struggle of Thai stocks to recover, citing sustained high interest rates set by the US Federal Reserve and subdued earnings from certain listed companies.
The International Monetary Fund anticipates a slower deceleration in inflation due to disruptions in global shipping routes, resulting in escalated ocean freight costs. Despite some cooling in the labor market, a commodities rally is expected to sustain inflationary pressures. Moreover, though China’s economy is showing signs of recovery, it remains fragile.
Soraphol noted that the US Federal Reserve’s indication of maintaining high interest rates for an extended period is driving foreign capital out of stock markets. Analysts have revised their estimates, lowering expectations of US rate cuts from 2-3 to 1-2.
Elevated interest rates are increasing borrowing costs for businesses, negatively impacting the stock market. Nevertheless, Thai stocks are seen as attractive, as certain sectors have rebounded strongly, posting significant profits in the first quarter, notably in tourism with a 29% year-on-year profit surge.
First-quarter performances of listed companies have displayed growth in revenue and net profit, prompting analysts to revise forward earnings per share projections for the SET.
Foreign long-term funds have shown interest in investing in stocks that have demonstrated substantial recoveries. The SET is gearing up to conduct roadshows to update foreign investors on the economic outlook and provide investment information about the Thai market, with upcoming roadshows planned for the Middle East, London, or Scandinavia in the following quarter.
By the end of May, the SET index had declined by 1.6% from the previous month and 5% from the close of 2023, ending at 1,345.66 points. Market participants are eagerly awaiting clearer details on stimulus measures and support actions for the stock market post-cabinet reshuffle.
Notable industry groups that outperformed the SET index in the first five months of the year included consumer products, agriculture and food, as well as services. Despite a 17.6% year-on-year decline in the average daily trading value for the SET and Market for Alternative Investment in May, it showed an increase from the prior month. Foreign investors divested Thai shares worth 16.6 billion baht last month, maintaining the highest trading ratio among investor categories for 25 consecutive months.
As of the end of May, the SET’s forward price-to-earnings (P/E) ratio stood at 14.4 times, surpassing the Asian stock market average of 12.2 times, with a historical P/E ratio of 16.1 times, edging ahead of the Asian markets’ average of 15.5 times. Additionally, the SET dividend yield ratio was noted at 3.48% at the end of May, exceeding the average of Asian bourses at 3.18%.
