Kasikorn Asset Management (K-Asset) expects the Thai stock market to fall in the second quarter as US inflation and interest rates slowly decrease, recommending investors diversify their risk by investing in the US and Indian stock markets.
K-Asset chief executive Wajana Wongsupasawat said the Thai market is expected to decline further in the second quarter, supported by a recent US inflation reading indicating it remains elevated, meaning the Federal Reserve may not cut interest rates as much as the market expected.
"The Thai market may not rise this quarter, but in the long term we still recommend investing in the stock and bond markets here," he said.
"K-Asset emphasises the importance of portfolio diversification without concentrating investment weight in any one asset or country. Diversifying risk will increase the returns and reduce the risk."
According to Mr Wajana, the US economy has posted continued growth while inflation gradually decreased to the Fed's target of 2%, as the central bank paves the way for a soft landing.
This means both the stock and bond markets are likely to offer positive returns once the Fed begins cutting interest rates, he said.
In addition, other major economies have started to show improved signs.
In Europe, where inflation is decelerating, the European Central Bank is expected to start reducing interest rates in this quarter, while Japan's GDP outlook for the fourth quarter of 2024 was upgraded, reflecting the growth potential of that economy, said Mr Wajana.
"The US and Indian bourses have continued to increase significantly since the beginning of the year, with the forward price-to-earnings ratios surging above the 10-year averages. We see those two markets as still interesting based on the outstanding profit growth trend of listed companies," he said.
"The bond market is feeling the pressure from the US economy, which was stronger than expected and caused the Fed to delay cutting rates. That might cause debt instrument prices to fluctuate from now on, possibly decreasing, particularly if economic data suggests the Fed might not be able to cut rates this year."
Nonetheless, Mr Wajana said debt instruments remain important in arranging investment portfolios to diversify risks.
If US rates enter a down cycle later, now would be a good time to gradually invest in this asset class, he said.
In a related development, Kasikorn Securities (KS) views the Stock Exchange of Thailand (SET) index as having support factors in May, with domestic purchasing power increasing as tourism recovers.
However, the main risk factors are geopolitical tensions and the Fed's hawkish stance.
KS expects the SET index to move sideways this month, with recommended stocks: Muangthai Capital (MTC), TMBThanachart Bank (TTB), Asia Aviation (AAV), Erawan Group (ERW) and Thai Union Group (TU).