Bangkok: Thai politics and global trade tensions are exerting pressure on the Thai stock market, but there is hope for recovery owing to low valuations. It is anticipated that Thai stocks might see a rebound in March.
According to Thai News Agency, Mr. Apichat Phubanjerdkul, Director of Strategic Analysis at TISCO Securities, has projected a recovery for the Stock Exchange of Thailand index in March. He attributes this optimism to the low valuation of Thai stocks, highlighting that the Forward P/E ratio stands at 13 times with a return of 4%. The book value per share is currently at 1.15 times, similar to the COVID-19 crisis period, when Thai stocks were trading below book value. With a dividend yield reaching up to 6.5%, investments in Thai stocks appear attractive compared to the 10-year bond yield of only 2%. This scenario is likely to draw investor interest, particularly for medium to long-term investments over the next 6-12 months, with an anticipated average return of 6-15% and a confidence level of 70-74%.
However, domestic political developments could influence market dynamics this month. Constitutional amendments and a no-confidence motion against the government are expected to escalate political tensions. In recent months, internal conflicts within coalition parties have surfaced over various issues, including provincial administrative elections, power cuts in Myanmar, and constitutional amendments. Although the relationship between major coalition parties hasn't reached a breaking point, potential impacts on government operations and a possible cabinet reshuffle could delay or affect the effectiveness of government tasks.
Furthermore, the Thai economy faces downside risks, with projected growth potentially falling below 3% for the seventh consecutive year. The GDP growth in Q4 of 67 was 3.2%, lower than expected, due to a contraction in private investment and a decrease in inventory, despite positive contributions from exports and private consumption. The economy's growth for the whole of 67 was 2.5%, which, while an improvement from 66, remained below market expectations of 2.7-2.8%. Looking forward, domestic consumption is expected to slow down, pressured by a high household debt-to-income ratio and cautious lending by financial institutions.
The National Economic and Social Development Board has projected the Thai economy to expand by 2.3-3.3% this year, with a median value of 2.8%. Inflation is expected to range between 0.5-1.5%. The Monetary Policy Committee (MPC), in its meeting on February 26, indicated plans to adjust the economic growth forecast slightly above 2.5% in April, down from the current 2.9%.
Global trade tensions, particularly stemming from US tariff policies, pose additional risks. President Trump's Reciprocal Tariffs measure could increase tariffs on Thai exports to the US, given Thailand's significant trade surplus with the US. This development places Thailand as the second most vulnerable country in Asia, after India, to US retaliatory tariffs. These uncertainties necessitate close monitoring of negotiations with the US and the potential impacts on the Thai economy.
In terms of monetary policy, the MPC's recent decision to reduce the policy interest rate to 2.00% is expected to remain unchanged throughout the year. However, further rate cuts could be considered if trade policies substantially impact the economy or if domestic financial conditions tighten.
TISCO reported that the Q4 financial statements reflected mixed results, with 47% worse than expected, 23% as expected, and 30% better than expected, leading to a downward adjustment in the market's profit estimate for 2025. The appropriate level of the SET Index has also been revised down from 1,600 points at the beginning of the year to 1,510 points.