Thai stocks heading towards 10-year record low

The market dropped to 1,400 points on October 20, close to the level recorded in 2013, which was around 1,200 points. At the beginning of 2013, the index was about 1,600 points but at the start of 2023, this had dropped to 1,691 points and has been gradually decreasing ever since.

However, over the past 10 years, the price-to-earnings ratio (P/E) has been around 19 (excluding the COVID period when registered company profits plummeted) and is now at 15.8, which is considered moderate and tradable.

Psychologically, investors are concerned about the international situation coupled with bond yields that significantly impacted the index’s decline. In September and October, it dropped by almost 300 points.

According to Nattapol Khamthakrua, director of securities analysis at Yuanta Securities (Thailand), the Thai stock market can be divided into two periods over the past decade. From 2013 to 2017, the index ranged from approximately 1,200 to 1,620 points. During this period, political instability affected the market. Acceleration began in 2018, reaching 1,800 points and then gradually dropping to around 1,500-1,800 points.

After reaching 1,600-1,800 points, the market declined due to the COVID-19 pandemic, hitting a low of 969 points. Following the pandemic, the market recovered, but dropped again below 1,500 and 1,400 points, respectively.

The main reason for the significant market adjustment is the increase in US bond yields. Thailand’s bonds from 10 years ago were at 2.2-2.6% until July 2023, remaining stable. However, they increased to 2.8% in August, surged to 3.2% in September, and rose to 3.3% in October.

The primary cause of concern is the Thai government's digital wallet policy, which requires substantial funds and potentially increased borrowing, leading to an oversupply of bonds and a subsequent price drop. This has worried investors, causing both Thai and foreign investors to sell bonds and impacting the Thai stock market significantly in September and October.

In the past nine months, the market dropped by 11.8% at the end of September and 16.8% by October 27. In the third quarter of 2023 (July-September), it decreased by only 2%. In July, it dropped 3.5%, increased by 0.6% in August, and was back at 20 points in mid-September due to the clearer political situation and the news of Thaksin Shinawatra's return to Thailand.

Third-quarter corporate results, expected to be similar to the predictions, and the GDP announcement for the same period, believed to be better than the second quarter, will be announced in November.

For the remaining two months of 2023, investors need to be cautious due to the potential economic decline in the US and Europe, affecting various consumption parameters and possibly leading to an economic recession. If there is a rebound, it could be an opportunity for portfolio adjustment by selling and preparing cash in case of a real economic downturn. The global stock markets are adjusting downward, presenting opportunities for buyers.

However, in the coming year, the Thai stock market is likely to remain concerned about the economic downturn. If the US does not stop raising interest rates or delays the process, along with the possibility of prolonged interest rate freezes, the economy might not withstand the pressure. Meanwhile, the return and recovery of China's economy still pose more significant risks.