Thai stocks hit by stubbornly high rates
The expectation that US interest rates will remain “high for longer” continues to pressure stock investments globally, with funds flowing out of emerging markets including Thailand, according to the Stock Exchange of Thailand (SET).
Soraphol Tulayasathien, senior executive vice-president of the SET, said the reasons Thai stocks have been unable to recover include the US Federal Reserve’s interest rates remaining elevated and some listed companies still posting tepid earnings.
The International Monetary Fund expects inflation to decelerate at a slower pace than expected as Red Sea chaos compels shipping companies to re-route, causing ocean freight costs to rise.
A commodities rally will contribute to prolonged inflationary pressure despite signs of a cooling labour market, he said, adding China’s economy shows signs of recovery, although it is in a fragile state.
“As the Fed has signalled US rates would remain high for longer, foreign capital will continue to flow out of stock markets. Analysts have reduced their forecasts for US rate cuts to 1-2 from 2-3 previously,” said Mr Soraphol.
As interest rates remain elevated, it raises interest costs for businesses, hurting the stock market, he said.
However, Mr Soraphol said Thai stocks remain attractive as some segments have recovered strongly and reported high profits in the first quarter, such as the tourism sector, with profits soaring 29% year-on-year.
The first-quarter performance of listed companies reflected overall growth in both revenue and net profit, prompting securities analysts to raise the SET’s forward earnings per share from projections made at the end of 2023.
Foreign long-term funds have expressed interest in investing in stocks that registered outstanding recoveries, he said.
President Pakorn Peetathawatchai said the SET is preparing to hold roadshows to update foreign investors on the economic outlook and provide investment information about the Thai bourse.
The next roadshows are scheduled to visit the Middle East, London or Scandinavia in the next quarter, he said.
At the end of May, the SET index fell 1.6% from the previous month and 5% from the end of 2023 to close at 1,345.66 points.
Investors are waiting for a clearer picture on stimulus schemes and supporting measures for the stock market following the cabinet reshuffle, said Mr Pakorn.
For the first five months this year, industry groups that outpaced the SET index included consumer products, agriculture and food, as well as services.
Average daily trading value for the SET and Market for Alternative Investment fell 17.6% year-on-year in May to 45.6 billion baht, but rose from the prior month. Foreign investors sold Thai shares worth 16.6 billion baht last month as their trading ratio remained the highest among investor types for 25 consecutive months.
The Thai bourse’s forward price-to-earnings (P/E) ratio was 14.4 times at the end of May, beating the Asian stock market average of 12.2 times. The historical P/E ratio is 16.1 times, surpassing Asian markets’ average of 15.5 times.
The SET dividend yield ratio was 3.48% at the end of May, exceeding Asian bourses’ average of 3.18%.
Source – Bangkok News
