Thailand's stock market outlook has a limited upside gain going forward as the country's economic slowdown and external headwinds continue to keep investor confidence at bay, says SCB Securities (SCBS).
The Stock Exchange of Thailand (SET) index is still under pressure from the Sino-US trade dispute and uncertainty over the interest rate direction of major central banks around the globe, said SCBS managing director Sukit Udomsirikul.
"I think the Thai stock market passed its peak this quarter. Overall market sentiment is not supportive as there is a possibility annual GDP growth will be downgraded to below 3% this year," said Mr Sukit.
"Oil prices continue to face pressure from US supply, with low oil prices affecting SET-listed energy companies. Energy stocks make up the majority of the SET index, so a decline in net profit of energy companies pulls down market valuation."
Thailand's GDP rose 2.3% year-on-year in the second quarter, easing from 2.8% growth in the first quarter, the National Economic and Social Development Council reported. This was the slowest pace in 19 quarters since the third quarter of 2014.
After seasonal adjustment, the economy expanded by 0.6% in the second quarter compared with the previous three months.
The state planning unit has cut its forecast for GDP growth in 2019 to 2.7-3.2% from 3.3-3.8%.
The government is expected to unveil policies to rev up domestic consumption in the final quarter to enhance confidence for foreign direct investment, private investment and tourism, said Mr Sukit.
Still, SET-listed firms' combined net profit is expected to fall to 5% from 8% in 2018 attributed mainly to external negative factors, according to SCBS.
Terdsak Taweethiratham, executive vice-president of Asia Plus Securities (ASP), said the latest stimulus package is anticipated to shore up consumer confidence and investment sentiment, helping liquidity in the economic system to circulate better.
"We see these measures as the first lot to help low-income people, and the second will come in the last quarter, targeting groups with high purchasing power. Expected measures include a tax rebate to encourage shopping and spending as well as personal income tax deduction," said Mr Terdsak.
The cabinet last Tuesday gave the nod to a 316-billion-baht stimulus package, hoping to improve the country's economic growth by 0.5-0.6 percentage points this year.
The main measures are additional allowances for low-income earners, additional funding and loans for small and medium-sized enterprises and farmers along with a cash handout for domestic travel.
The SET index is projected to hover in a range of 1,600-1,750 points, with average oil price expected at $60 per barrel, according to ASP.
Fund flows are poised to return to equity investment since the low-risk asset class offers low returns, said Mr Terdsak.