The Thai stock market, specifically the SET index, experienced a sell-off this week, reaching its lowest point since November 2020 due to significant drops in heavyweight stocks like Delta Electronics and Airports of Thailand (AOT). KKPS warns of challenges ahead for the Thai stock market due to weak performance forecasts, despite strong banking results. Electronics and transport sectors drag earnings.
Key Points
- The SET index in Thailand dropped to its lowest point since November 2020 due to a sell-off in heavyweight stocks like Delta Electronics and Airports of Thailand (AOT), which were impacted by weaker-than-expected results and concerns about liquidity, respectively.
- The upcoming week will see the last of the fourth-quarter 2024 earnings announcements, with major stocks that could sway the overall index including CPALL, CPF, KCE, HANA, BDMS, OSP, SAWAD, BEM, AWC, BGRIM, AMATA, and CPN.
- Thailand’s economic growth in 2024 fell short of expectations at 2.5%, with private consumption and investment also underperforming, leading to expectations of a slowdown in GDP growth this year to 2.4% amid global trade uncertainties, high household debt, and an influx of cheap goods from China.
The Thai stock market, specifically the SET index, experienced a sell-off this week, reaching its lowest point since November 2020 due to significant drops in heavyweight stocks like Delta Electronics and Airports of Thailand (AOT). Delta’s fall was due to weaker-than-expected results and potential legal expenses, while AOT was affected by concerns about its main duty-free contractor, King Power.
The upcoming week will see the last of the fourth-quarter 2024 earnings announcements, with major stocks like CPALL, CPF, and KCE potentially impacting the overall index. The SET is expected to trade within 1,240 to 1,280 points in the short term. Global events, such as US-China relations and the meeting between President Xi Jinping and Chinese tech firm leaders, could also influence global stock volatility. Thailand’s economic growth in 2024 was lower than expected, and it’s predicted to slow further in 2024 due to factors like high household debt and an influx of cheap goods from China. The MSCI rebalancing at the end of February will see changes in the index composition, with stocks like PTTGC and TOP being moved to the MSCI Small Cap index.
Thai Stock Market Challenges
Kiatkakin Phatra Securities (KKPS) further highlights that the Thai stock market’s outlook remains fragile due to the heavy reliance on banking sector performance. The robust 20% year-on-year growth in bank earnings has masked weaknesses in other sectors, particularly electronics, where DELTA’s underperformance has significantly dragged overall results. Analysts caution that such sectoral imbalances could lead to heightened volatility, especially if banking momentum slows in the coming quarters.
Looking ahead, KKPS advises investors to adopt a cautious approach, focusing on sectors with resilient fundamentals and diversified revenue streams. The firm also notes potential headwinds from global economic uncertainties, fluctuating commodity prices, and geopolitical tensions, which could exacerbate challenges for export-driven industries in Thailand. As a result, market participants are urged to closely monitor macroeconomic indicators and corporate earnings updates to navigate the uncertain landscape effectively.
Market Outlook and Strategic Recommendations
Analysts expect cautious future guidance due to fragile macroeconomic improvements. Despite strong banking results, weaknesses in domestic demand and decreased tourism numbers are concerning. KKPS anticipates earnings downgrades for 2025, recommending a defensive strategy focusing on resilient sectors like banks and telecoms. Meanwhile, electronics and food exporters remain vulnerable due to tariff impacts. The firm highlights that due to macroeconomic factors, market valuations may be negatively affected in the short to medium term.
