Geopolitical risks and the protracted domestic economic slowdown will continue to limit foreign fund inflows into Thailand's stock market this month, says Asia Plus Securities (ASP).
Foreign investors were the sole net sellers in May of local equities, worth 31.6 billion baht, with year-to-date foreign net outflows totalling 194 billion as of May 29.
Equity purchases from domestic institutional investors began to subside in May compared with the previous month, indicating the Thai bourse was driven by existing investment portfolios and rotating investment flows in various groups of stocks, according to ASP.
In addition to the economic lag from the global pandemic, flaring tensions in the US-China trade war is putting more pressure on stock markets worldwide, said Therdsak Thaveeteeratham, executive vice-president of the research division at ASP.
On the domestic front, second-quarter economic figures are anticipated to be much weaker than the first quarter as a result of effects from lockdown measures, said Mr Therdsak.
GDP growth is forecast to contract by 5-7% this year, according to ASP.
The economy is on the path to a recession after shrinking 1.8% year-on-year in the first quarter, the deepest contraction since the flood-hit fourth quarter of 2011.
Several economic indicators posted dismal figures in April against the backdrop of an inbound travel ban to contain the outbreak. No foreign tourists arrived last month, while exports shrank by 15.9% year-on-year if gold shipments were excluded.
Factors to watch for in June are measures include stimulate the economy, including monetary policy, which has a tendency towards additional easing, said Mr Therdsak.
Investors are recommended to prepare their portfolios to mitigate market fluctuations by focusing on investing in secured stocks with low volatility during the slowdown, he said.
For Thailand's stock market overview in the first quarter, the aggregate earnings of SET-listed companies fell sharply by 51% quarter-on-quarter and 61% year-on-year as revenue was curtailed by the virus pandemic.
The net profit of listed companies for the second quarter is expected to be the lowest of the year, said Mr Therdsak.
"This is considered a downside risk to our forecast and leads to a revised earnings forecast for 2020 once again," he said. "We expect the new earnings-per-share in 2020 to be 64.0 baht, lower than the consensus of 67.7 baht per share, and consider the market earnings yield gap at 55%, with the target price-to-earning ratio at 18.2 times."