Equities jumped on Thursday on the Stock Exchange of Thailand (SET) on bets for a Joe Biden victory, even though the US election outcome may remain unknown for some time.
The SET index rose by 41.88 points or 3.43% to close at 1,264.32, in turnover worth 80.9 billion baht. Large cap stocks rallied, led by CP ALL gaining 3.75%, while Kasikorn Bank was up 1.75% and PTT increased 1.5%.
Asian stocks are expected to see greater inflow if Mr Biden wins, due to his policy outline to relax trade tariffs, and Thailand does not have many political factors still weighing on market sentiment, said Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organizations (Fetco).
About 300 billion baht flowed out of the Thai stock market in the first 10 months of this year as the pandemic dented investor confidence, while the index for the next three months has a bearish outlook.
Mr Paiboon said the pandemic caused a huge outflow from the Thai stock market to low-risk assets and technology stocks, mostly those listed in the US, China and Taiwan that offer higher potential for growth.
As stock prices in the technology sector hover at high levels, investors are expected to move to the real sector, where stock prices remain low.
"We expect foreign investors will return to traditional stocks next year, especially when a vaccine for the coronavirus is successfully developed, and estimate the SET index being at 1,200 points will serve as a strong support line for this year with opportunity for growth in the next year," he said.
Due to numerous adverse factors since the beginning of 2019, investor confidence was crippled as Thai stocks are mostly tethered to the old economy and tourism sector, which is being set back by a recession. In effect, investors moved into other countries with advanced technology markets and stocks related to the new normal lifestyle thanks to relatively high growth.
Mr Paiboon estimates Thai-listed companies' earnings next year will increase 30-40%, while the net profit of listed firms is expected to drop by 20-40%.
"If Joe Biden wins, the US stock market might not be as favourable as if President Trump wins. International trade sentiment will improve because Mr Biden likely won't take the same approach as Mr Trump. This could cause an outflow into emerging markets, including Thailand, which remains attractive. But Thailand has to curb domestic risks, especially those from political demonstrations," he said.
The Investor Confidence Index (ICI) for October showed for the next three months, sentiment for the SET is bearish at 61.3, a 9% dip from last month, as well as the lowest sentiment in eight months because of political factors, a domestic economic retreat, poor inbound tourism and concerns over a second wave of outbreaks.
The ICI listed food and beverage as one of the most attractive sectors and banking as the least attractive, while the most influential factor driving the market is domestic economic growth, with local politics a drag.