Three factors hammering Thai stock exchange: analyst
Uncertainty over weak profit forecasts, political issues, and the global economic freeze are hammering the Stock Exchange of Thailand (SET) Index, said an expert at Tisco Securities.
Senior Tisco Securities strategist Apichat Poobunjirdkul said the Thai stock market is currently facing a correction and is likely to rise at lower rate than global indices for a while.
He said the market is currently under pressure from three factors:
1. Weak market profit forecasts: According to Bloomberg Consensus, second-quarter profits of 133 securities accounting for 76 per cent of total market capitalisation are expected to total Bt90.1 billion, down 49 per cent year on year, but up 17 per cent quarter on quarter.
"However, listed companies' second-quarter performances showed total net profit of Bt41.2 billion, down 14 per cent from the market expectation due to banks' move to set up allowances for doubtful debts to deal with future economic risks," Apichat said.
"Also, we expect other stock analysts to cut their profit forecasts for listed companies further because profit in the first half of this year accounts for 35 per cent of the full-year forecast."
2. Political issues: US-China tensions are likely to escalate as Donald Trump ups accusations against Beijing to increase his credibility with voters ahead of the US presidential election on November 3, while the political outlook in Thailand remains gloomy.
"We expect the [Thai] Cabinet reshuffle to occur this month as this will help relieve pressure among government coalition parties and enable government and civil servants to work as normal," Apichat said.
"We advise investors to monitor the government's work after the Cabinet reshuffle, debate on the 2021 budget, and political protests after the state of emergency expires."
3. The global economic freeze: The world economy will weaken because economic stimulus measures are set to expire soon.
"Meanwhile, moves to impose additional measures will be delayed or insufficient to cope with the Covid-19 fallout, forcing countries to impose lockdown measures again," Apichat predicted.
He advised investors to buy when the index falls below 1,300, focusing on stocks that show good performance and better profit forecasts, and pay interim dividends,.
"Recommended stocks in August were AP, CPF, DCC, PRM, SMPC, and TVO," he added.
"The index's support level this month is between 1,300 and 1,305, while the resistance level is 1,350."
