SCBS predicts volatile Q4
Stock market volatility is likely to surge this quarter as positive factors dissipate amid heightening downside risks both internally and externally, says SCB Securities (SCBS).
The Stock Exchange of Thailand (SET) index is expected to fall below 1,200 points this month because of a second-wave outbreak in many countries, and it will take time to successfully develop a vaccine for humans, said Sukit Udomsirikul, managing director of research at SCBS.
The bourse is projected to move in a range of 1,160-1,200 points in October before ending the year at 1,300 points.
Thailand's economy is anticipated to continue slowing down, subsequently affecting the financial performance of core business sectors such as banking, petrochemicals and tourism, Mr Sukit said.
The performance of these sectors hinges on the successful development of a vaccine, he said.
"Risk factors will increase this quarter, as Covid-19 could spread widely during the winter," Mr Sukit said. "Uncertainty over the US 2020 presidential election and a no-deal Brexit will add volatility to the stock market."
SCBS forecasts Thailand's economy to contract by 7.8% this year, down from a 5.9% decline seen previously, because of a slower-than-expected recovery of the tourism sector, rising bad debt and unemployment, and the baht's strength.
Sectors hit hardest by the outbreak include tourism and logistics, down 50% and 39% year-on-year in the first half, because of the travel ban imposed on foreign tourists.
As these two segments represent the lion's share of the nation's GDP, the decline has seriously damaged the overall economy, Mr Sukit said.
External factors warranting a close watch this quarter include the fragile global economic recovery, post-election US economic policy and geopolitical risks, according to SCBS.
Economic figures could show signs of slowing because of the risk of a second Covid-19 outbreak in many countries worldwide, Mr Sukit said.
US economic policy could be tightened if Joe Biden, the Democratic presidential candidate, wins the election, he said.
The reasoning is that Mr Biden plans to raise the fiscal deficit by US$7 trillion over 10 years to support spending on social welfare and infrastructure projects. Mr Biden plans to fund the fiscal deficit with a $4-trillion tax hike, Mr Sukit said.
Global geopolitical risks have increased over the past few months, with the tense situation between the two largest economies signifying a long-term plan for the US to prevent China from becoming a superpower, according to Mr Sukit.