Confidence remains stuck in neutral until September
Investor confidence for the three months to September remains in neutral territory as concerns over second-quarter earnings at listed companies offset hopes of an economic recovery.
The investor confidence index (ICI) in June rose by 4% to 101.19 from May's 96.93, according to the monthly survey by the Federation of Thai Capital Market Organisations (Fetco).
An index below 80 points is considered bearish, 80-120 is neutral and over 120 is bullish.
Foreign investor ICI climbed into bullish territory at 125, while the confidence gauge among proprietary traders rose into the neutral zone at 100.
Confidence among local institutional investors dropped slightly but remained neutral at 100, while the retail investor ICI fell into bearish territory at 71.79.
Investors viewed the food and beverage sector as the most attractive, while banks were seen as the least favourable, said Fetco chairman Paiboon Nalinthrangkurn.
Shares in the banking sector have declined by more than 30% in aggregate on a year-to-date basis as fears have been fanned over rising bad-loan prospects.
Asset quality concerns and regulatory risks have resulted in a negative outlook for banks, with non-performing loans poised to rise in the second quarter due to the economic slowdown. The coronavirus crisis has caused corporate income to fall sharply.
Concerns are amplifying over the risks from a reduction in the ceiling lending rate for consumer loans, including credit cards, personal loans and titles, which are directly regulated by the Bank of Thailand.
BBL Asset Management (BBLAM) mutual fund manager Jeff Suteesopon said Thai banks remain strong, but there is reduced opportunity to increase capital because each bank has to beef up its reserve provision.
BBLAM expects the banking sector's net profit to decline by 40% year-on-year to 120 billion baht from 200 billion baht, with a short-term underweight outlook.
Worawat Saisuphatphol, senior analyst at UBS Securities Thailand, said Thai banks have high provision reserves and still have a high capital adequacy Tier 1 ratio compared with international counterparts.
Banking share prices are poised to bottom out after their second-quarter earnings are reported, Mr Worawat said.
Investors view Thailand's economic growth as the main factor boosting their confidence, followed by government policies and capital inflows, Fetco's Mr Paiboon said. But concerns over second-quarter earnings of listed firms are a drag on confidence, as well as a potential second wave of the pandemic.
Economic factors that warrant further monitoring include the economic impact from geopolitical conflicts such as the US-China trade war and the border conflict between China and India, he said.
Domestic factors needing a follow-up include the economic impact from the virus outbreak, the impact of lifting lockdown measures and the lapse of various fiscal, credit and financial support measures from the government.