Property, financial stocks to go up following rate cut: Analysts
Securities analysts see a brighter future for stocks in property and finance if Bank of Thailand cuts interest rates in December
Stock analysts estimate that shares in property and financial-related businesses will increase in price after the long-awaited reduction in the interest rate – a move several parties expect the Bank of Thailand (BOT) to announce around December.
Gun Hathaisattha, an investment analyst at CGS International Securities, said on Tuesday that he expected the BOT to cut the policy rate in the last meeting this year in December, following a reduction of the US interest rate by the Federal Reserve, which could happen as early as this month.
After the rate cut, both property and financial stocks will increase in price, especially the former, whose price has gone down further this year, he said.
Property companies have an advantage over financial firms, as they have wider investment markets covering upcountry areas, while financial customers are mostly clustered in the metropolitan area, said Gun.
“However, the property sector this year is facing challenges as a result of the flooding. If the problem drags on for too long, investors could eventually shift their capital elsewhere,” he added.
Gun also predicted stagnant growth in the loan market this year due to banks employing stricter loan measures and rising household debts. It remains to be seen whether the government’s digital wallet scheme will help reduce household debts or not, he said.
Passakorn Wangwiwatcharoen, deputy research director at Asia Plus Securities, said the rate cut is likely to be announced at the BOT’s meeting on December 18, while the meeting in October will leave the rate unchanged at 2.5%.
He estimated that non-bank financial institutes and hire-purchase businesses will benefit greatly from the rate cut due to decreased financial capital.
Apichart Phubunjerdkul, senior analyst at Tisco Securities, did not agree with the assessment by his peers, saying that he believed the central bank would not reduce the policy rate this year, as the Thai economy is likely to improve around year end thanks to the government's various stimulus campaigns.
“The BOT is likely to wait and see the policy of the US Federal Reserve and how it pans out, therefore the rate cut would probably not happen this year,” he said.
Apichart said that when the rate cut finally occurs, property and financial stocks would see a price increase, as both are very sensitive to the interest rate.
