PUBLISHED: 21 Sep 2024 at 11:02
The Stock Exchange of Thailand has surpassed the 1,400-point resistance level this month and continues to show upward momentum, with periods of consolidation. Major players such as ADVANC, GULF, and stocks in the banking and healthcare sectors have driven notable gains since mid-August.
Diverse buying activity is evident, with the market breadth indicator rising significantly from 31% at the start of the month to nearly 55% in mid-September. A reading above 50% suggests heightened investor engagement, with increased trading in mid- and small-cap stocks alongside blue chips.
Key domestic factors enhancing market momentum include the establishment of a new cabinet and the government’s policy announcement focused on economic stimulus and major infrastructure projects. Coupled with attractive valuations of many Thai shares, these elements have fostered greater investor confidence.
A bullish market breadth indicator typically gathers momentum toward 80% before facing major consolidation, indicating that the Thai stock market is likely to experience strong sentiment until late September or early October, supported by both fundamental factors and tactical strategies.
From a fundamental perspective, the stock market is set to gain from various stimulus measures and increasing interest in stocks with promising performance forecasts during the upcoming earnings season. The fourth quarter’s year-on-year performance is expected to benefit from a low base effect due to last year’s delayed fiscal budget.
THAI RATE CUT POSSIBLE
Investors are also optimistic about a potential interest rate cut from the Bank of Thailand in October, narrowing the gap with US rates now that the Federal Reserve has made adjustments. This move could be necessary to mitigate foreign exchange risks, especially as the baht has appreciated significantly.
Tactically, Vayupak Fund 1 is set to begin trading Thai shares from October. Should market consolidation transpire during the month, capital infusions from the fund could provide essential support and help propel market activity.
As we approach year-end, the market is poised for increased liquidity from Thai ESG funds compared to the previous year, enhanced by attractive tax benefits.
Current catalysts are likely to stimulate additional buying and stock rotation, aiming to push the benchmark index towards the 1,500-point resistance level.
However, global market risks may intensify from late October. Future reports will delve into these issues in detail, while market participants can enjoy the current upward trend. Among the supportive factors for the Thai market are:
- Vayupak Fund 1 has successfully attracted between 100 billion and 150 billion baht from Type A investors, set to focus on infrastructure plays and stocks with SET ESG ratings of A and above;
- New inflows from Thai ESG funds;
- Earnings forecasts from the banking sector indicating potential recovery in certain industries;
- Domestic stimulus measures launching next week, including a cash handout to 14.5 million needy Thais;
- Anticipated bidding for several urgent mega-projects.
While external factors largely appear bearish, some buffers against a global economic slowdown, such as a relatively stable financial sector, remain in place.
Key risks include the possibility of a mild recession in the US and global economy. With leading indicators, particularly US employment and consumption weakening, vigilance is advised for the upcoming months. Investors should carefully monitor the US services purchasing managers’ index for any drops below 50, alongside weakening non-farm payroll readings and rising credit card debt issues.
