Investors warned to be cautious of tech and other disruptions
The Federation of Thai Capital Market Organisations (FETCO) has identified four main challenges that investors should watch for going into 2024 and forecasts a certain amount of disruption as the global economy tries to define the “next normal”.
Investors will have to face a global economic slowdown, the federation says, with the IMF predicting economic recovery in North America and Europe to be weaker than in Asia. This is reflected in manufacturing in all four regions, which have all seen decreases in their purchasing managers index (PMI). In addition, China’s real estate crisis is expanding to other sectors of its economy and will pose challenges to investors. A weakened yuan has seen export prices fall 10%-15%, raising concerns for Thai manufacturers. With instability on the geopolitical and global economic stage, investors should be cautious.
FETCO has outlined disruption in four different sectors. As the world searches for the meaning of the so-called next normal after four years of recovery, investors should look out for disruption in the technology, economic, geopolitical and climate sectors. Technological disruption like cloud-based platforms and AI technology will play a big role in shaping the digital economy going forward, priming the tech industry for the biggest disruption since smartphones. Economic disruption means more of the global economy being centred around Asia. With this in mind, companies that are well prepared to enter the Asian and international markets should prove a boon to investors as the region attracts more investment and attention from North America and Europe.
Geopolitical disruption is also more relevant than ever. As seen in the Black Sea grain deal and the Yemeni blockade of the Red Sea, geopolitical factors greatly affected the global supply chain in 2023 and will continue to do so in 2024. Lastly, climate disruption is another challenge to watch out for in 2024. Thailand’s main export markets are adopting laws and regulations to ensure sustainability and emission reductions. European GDPR laws or the UN’s COP28 will be an advantage to Thai exporters that have adopted sustainability goals and will prove challenging for firms still transitioning.
The world is set for economic recovery and defining the next normal. Over the past two years, US inflation has fallen from a peak of 9% to 3%, nearing the Fed’s target rate of 2%, Korbsak Pootrakul, president of FETCO, notes, adding that the US Central Bank’s success in reigning in inflation makes any further interest rate adjustments affecting the markets unlikely.
