The Stock Exchange of Thailand (SET) index could surge to 1,750 points within one month, driven by capital inflows channelled into emerging markets after a possible rate cut by the US Federal Reserve, says Kasikorn Securities (KS).
Apart from the Fed's rate cut signals, the weakening US dollar and optimism surrounding next week's G20 summit in Japan are factors attracting foreign capital to Thailand's capital market, said KS head of research Passakorn Linmaneechote.
KS is maintaining its 12-month SET index target of 1,725 points as projected in May.
"[Capital inflows] prompted by the Fed's dovish monetary policy stance have resulted in a narrower 10-year yield gap between US treasuries and Thai government bonds by 0.4%," Mr Passakorn said.
A dip in US treasury yields has dragged the yield of Thai government bonds lower and spurred inflows into emerging stock markets, he said.
A continuous decline in the 10-year Thai bond yield could prompt the SET index to reach 1,895 points, Mr Passakorn said, adding that market sentiment will grow more buoyant if the upcoming G20 summit comes to a positive conclusion.
He said foreign capital could continue flowing into Thailand's stock market in the third quarter due to the Fed's possible rate cut and expectations of prolonged Sino-US trade disputes.
"There is a tiny possibility that the US interest rate trend will change as the non-farm payroll still reflects US economic growth, with inflation poised to remain subdued as oil prices are quite stable," Mr Passakorn said.
On the domestic front, foreign investors are keeping a close watch on policies devised by the new government, particularly measures to address farmers' plight and low-income earners, he said.
An increase in the daily minimum wage is not anticipated during the first phase of policy implementation but is expected in the second phase, he said, noting that such an increase would take a toll on labour-intensive sectors.