Abrdn expects Vayupak Fund to help SET Index hit 1,500 by year-end

Darunrat Piyayodilokchai, its head of equities, told a media briefing on Friday that she expected the SET Index to reach 1,500-1,530 points by the end of the year, up from the previous estimate of 1,360-1,450 points.

This upbeat outlook is supported by a recovering Thai economy and new inflows from the Vayupak Fund.

"We believe the market has hit bottom, with a new key support level at 1,270 points. The revised target is based on projected listed company earnings of 90 baht per share and a price-to-earnings ratio of 15 times," she explained. 

Additionally, she predicted that the Thai economy would perform better in the second half of the year, with GDP growth projected to be around 2.7% in 2024, aided by tourist arrivals. 

International tourists are expected to reach 36-37 million this year, exceeding previous estimates of 33-35 million, with Chinese visitors almost at 60-70% of pre-Covid levels.

Meanwhile, corporate earnings, or earnings per share, were forecast to grow by about 10% this year, with double-digit growth anticipated in the second half compared to the first half.

"The second quarter of 2024 saw a 17% year-on-year increase in company profits," she noted.

Despite the positive outlook for Thailand's stock market, she highlighted the potential upside risk of the digital wallet policy, which is set to begin in September and distribute 150 billion baht to eligible recipients.

"While details are still unclear, the 150-billion-baht scheme for welfare card holders is expected to contribute less than 1% to GDP," she said. 

Darunrat also highlighted the significance of the new Vayupak Fund offering, which could inject up to 150 billion baht into the market beginning in October, potentially offsetting recent foreign selling of Thai stocks.

"The fund is expected to provide a significant boost to Thailand's stock market. It can offset foreign net selling and increase liquidity," she said. 

On monetary policy, Abrdn expects the Bank of Thailand to reduce interest rates by 50 basis points over the next six months, bringing the policy rate to 2% by the end of 2024, as the Thai economy continues to recover.

In terms of sector recommendations, she suggested focusing on healthcare, hospitals, domestic retail, and consumer finance companies. However, she has downgraded the weight of the hotels and hospitality sector due to potential foreign exchange risks and higher operating costs associated with new hotel openings.

Short-term fluctuations from the US election

David Hanzl, head of Asia Pacific Wholesale at Abrdn, expressed optimism about the US stock market, citing strong economic fundamentals and a favourable interest rate environment. 

While acknowledging that the upcoming US presidential election may cause short-term volatility, Hanzl advised investors to maintain a medium to long-term perspective and focus on the quality of companies in the stock market, such as those in the healthcare, consumer, and technology sectors. 

He advised investors to prioritise portfolio diversification by investing in a variety of alternative assets such as natural resources, emerging market equities, and growth stocks. 

He also sees potential in the Asian market, particularly the Frontier market, which is expected to provide lucrative investment opportunities.