The Stock Exchange of Thailand (SET) index could plunge to 1,500 points this year as a support level because the escalating Sino-US trade war will continue denting investor confidence, says Kasikorn Securities (KS).
Although the bourse could pick up, several uncertainties are keeping investor confidence at bay. The US is expected to roll out more retaliatory measures against China as Washington does not want Beijing to become a leading superpower with advanced technological capabilities, said deputy managing director Kavee Chukitkasem.
For Thailand, domestic consumption and public investment are the main engines propelling economic growth going forward as tourism and exports are dependent on external developments, said Mr Kavee.
The country's real GDP growth expanded by 7.7% on average during 1960-96, supported by the Eastern Seaboard Development programme and investment incentives from the Board of Investment, suggesting that public investment is primarily shoring up economic growth momentum, according to KS.
There are several government projects related to infrastructure development and innovation such as the Eastern Economic Corridor initiative, mass transit development in Bangkok and dual track railways in nearby provinces, as well as the 10 S-curve industries and tax exemptions for R&D and innovation.
Many projects have been approved but not much progress has occurred. The new government should accelerate projects to help stimulate domestic consumption and private investment incentives, said Mr Kavee.
The escalating Sino-US trade war is a sign of how the US is pushing back against a new challenger to its economic throne, he said.
"The US does not want to give in to China, which has a 14.1% market share for global trade, higher than the US's 8.7%. The yuan still ranks sixth in terms of international fund transfers," said Mr Kavee.
Investor confidence could dip further as the Sino-US trade row is expected to prolonged, says Kasikorn Securities. Pornprom Satrabhaya
The world's second largest economy also plays a greater role in terms of technology, weapon development and trade partnerships, posing a threat to the US's hegemony, he said.
"This could cause a global economic recession and global stock markets have been pressured by this risk factor, with a downside outlook," said Mr Kavee.
"We may see many countries attempting to stimulate their economies by boosting domestic consumption or reducing interest rates to avoid effects from a global economic slowdown and the trade war."
But it is difficult for China to launch additional economic stimulus measures because its private sector has high debt levels and the country had already launched stimulus policies during previous years, he said.