External risk factors and internal economic headwinds are poised to continue curbing inflows to Thailand's stock market, says Asia Plus Securities (ASP).
Apart from the prolonged US-China trade spat, rising geopolitical tensions in the Middle East and the 2020 US presidential election are external risks influencing global economic growth and investment sentiment worldwide, said ASP executive vice-president Therdsak Thaveeteeratham.
The strong baht will also have an impact by discouraging foreign investment in Thailand's stock market, Mr Therdsak said.
On the domestic front, drought conditions -- which are likely to be the most severe in over 40 years -- will likely take a toll on farmers' purchasing power, while exports are poised to continue reeling from the trade war impact, heightening geopolitical tensions and the strong baht, he said.
Thailand's GDP growth is projected to expand by 2.8% this year, according to ASP. If this holds true, that would be a minimal increase from last year's GDP growth anticipated at 2.5% by the Bank of Thailand.
"The country's economic growth is expected to be lower than global GDP growth, expected at 3.4%," Mr Therdsak said. "These external and internal factors are having effects on attracting foreign capital inflows [to the Thai stock market]."
This year is poised to be the sixth straight year in which the Stock Exchange of Thailand index will experience net foreign outflows, according to ASP. The SET index recorded a weak gain of 1% in 2019, ending the as one of the weakest performers in Asia.
"The SET index will face higher fluctuation with limited upside gains," Mr Therdsak said. "The key factor for investment is stock selection."
This will be the first year in which the Thai capital market lacks support from inflows derived from long-term investment funds (LTFs), due to termination of the LTF tax deduction privilege, with the purchase volume of institutional investors in LTF units expected to fall by half.
Retail investors could also sell their accumulated LTF units at a combined value of 180 billion baht this year because of the terminated tax privilege, Mr Therdsak said.
Disbursement of the fiscal 2020 budget, government economic stimulus packages and the low-rate environment are identified as factors propelling economic growth for Thailand this year, he said.
CRYPTOCURRENCY SURGE
As investors have shifted their investments to safe-haven assets, such as gold and government bonds, oil prices continue to spike amid the US-Iran conflict.
Cryptocurrencies, especially bitcoin, are another asset class seeing considerable gains since the start of 2020.
The price of bitcoin has risen from US$7,000 per bitcoin to over $8,000 on a year-to-date basis, with flaring geopolitical tensions liable to sustain the surge.
Other cryptocurrencies, such as ethereum and litecoin, have also logged considerable gains since Jan 1.
"This latest bitcoin price increase underscores a mounting consensus that bitcoin is becoming a flight-to-safety asset," said Nigel Green, chief executive and founder of deVere Group. "Bitcoin is living up to its reputation as 'digital gold'. Bitcoin -- which shares gold's characteristics of being a store of value and scarcity and of being perceived as being resistant to inflation -- could potentially dethrone gold in the future as the world becomes increasingly digitalised."
Converting traditional assets to bitcoin is also efficient in terms of asset transfer, as digital assets can be easily transferred and retrieved through user passwords, said Jirayut Srupsrisopa, co-founder and chief executive of Bitkub Capital Group Holdings.