With the pandemic likely to stretch well into 2021, this year could see short-term investment strategies become permanent trends.
All things digital technology and healthcare are projected to see the biggest returns as the world continues to offer more virus preventative measures and relies on increased virtual communication to keep business and social life running until a vaccine is fully deployed.
Tisco Asset Management president Theeranat Rujimethapass said foreign investment funds (FIFs) with portfolios in technology, digital healthcare and Chinese equities have been identified as the most attractive investment destinations for 2021 as technology and digital healthcare funds have offered relatively higher average annual returns, at about 40% in 2020.
He foresees global technology and digital healthcare stocks continuing to offer the highest returns among asset classes in 2021 and 2022, as their earnings are projected to grow worldwide amid the pandemic. Chinese stocks are also expected to perform well because of the country's swift economic recovery.
China's economy is projected to grow by 5-6% in 2021, which is likely to be the highest rate worldwide, thanks to its successful control of the pandemic and the country's policies to stimulate domestic consumption and tourism, said Mr Theeranat.
As Chinese tourists cannot travel abroad, they have switched to visiting local attractions, which helped the domestic economy to recover quickly, he said.
Mr Theeranat recommends investment in Chinese technology and consumer stocks, which tend to yield higher returns than other sectors.
As for Thai stocks, he said they have a chance of making good returns, but investors need to be selective and invest only in stocks that will benefit from the government's investment projects, while avoiding tourism-related stocks that will continue to be battered by the pandemic.
Gold should make up only about 5% of portfolios because of price fluctuations, though high-risk investors can allocate more assets to this segment. Apichart Jinakul
ASSET ALLOCATION
The recommended asset allocation for 2021 is a medium-risk model, which allocates up to 50% of the portfolio in stocks and other risky assets, with about 20-25% allocated to Thai stocks and about 20-25% allocated to FIFs. The remaining 50% is allocated to money market funds and short-term fixed-income funds.
While investment in the latter category offers low returns, investors can easily shift their investment to riskier assets if the stock market rallies amid an economic recovery or the successful roll-out of a Covid-19 vaccine.
Meanwhile, bonds will continue to offer low returns because of the low interest rate, as central banks the world over continue with quantitative easing to spur economic recovery, said Mr Theeranat.
As gold is a riskier commodity because of its price fluctuations, investors are recommended to allocate only about 5% of their portfolio to the precious metal, though investors who are able to absorb a higher level of risk could opt to invest a larger amount, he said.
Gold prices hit a record high in 2020 with returns at around 40%, but this has now declined to 15-20%.
Mr Theeranat recommends investors wait until the price drops to nearly US$1,500 an ounce before accumulating it.
PROS AND CONS
Major positive factors driving the Thai stock market in 2021 are the successful deployment of a Covid-19 vaccine, ongoing quantitative easing and interest rates that are expected to remain low for another year or two.
Major negative factors to monitor include the increase of non-performing loans and particularly household debt, a surge in Covid-19 cases and a slow economic recovery.
Jitra Amornthum, vice-president at Finansia Syrus Securities (FSS), said the success in Covid-19 vaccine development has brought huge inflows to the stock market.
"I expect foreign investors to continue overweighting Thai stocks after selling shares valued at over 500 billion baht over the past 4-5 years," she said.
FSS offers three equity investment themes for 2021, including technology stocks, cyclical stocks, and stocks related to healthcare services.
BBL Asset Management chief investment officer Peerapong Jirasevijinda said the most attractive investment next year will be FIFs, especially those with a policy to invest in Asia and China.
He recommends asset diversification because it is a good strategy amid global uncertainty, protecting funds from volatility and offering the chance of higher returns compared with only investing in the domestic stock market.
However, while investing in high-risk assets may offer a strong chance of gaining good returns, it may not be suitable for everyone as investors must consider their risk threshold.
Analysts have revised their SET index forecast range up to 1,550-1600 points for 2021.
FSS's Ms Jitra and Kavee Chukitkasem, deputy managing director of Kasikorn Securities, said the SET will reach 1,600 points thanks to inflows spurred by the success of vaccine development.
Terdsak Taweethiratham, vice-president at Asia Plus Securities, expects the SET to rise to 1,550 points.
According to Krungsri Securities, investment sentiment will continue on an upward trend from the fourth quarter of 2020 as the economy begins to recover because of progress in the development and distribution of vaccines.
However, even though many countries have started implementing mass vaccination, widespread outbreaks still persist and remain a negative factor pressuring global stock markets, including the emergence of a new variant of Covid-19 in Britain, which is driving down European stocks.
Other factors to follow include international economic policy and the direction of global trade, which will largely be influenced by the new US government's decisions, said Krungsri Securities.
The volume of fund flows is another key factor to watch as it could drive the stock market up or down, albeit over the short term.
Emerging markets including the Thai stock market will gain from the momentum if foreign capital continues to search for yield, motivating the index to continue rising.
On the domestic front, a new surge of infections and the plausible threat of a spread into many areas, particularly those in proximity to industrial zones such as the Eastern Economic Corridor, poses a risk to the country's economy. Lockdowns in these areas would mean disruption to the country's industrial production.
As the economy begins to recover because of progresses in vaccine development and distribution, investment sentiment is expected to continue on an upward trend.
RECOMMENDED STOCKS
KGI Securities (Thailand) views value stocks, which are usually evaluated based on their price-to-earnings ratio or price-to-book value, as likely to outperform growth stocks such as technology stocks and defensive stocks such as utilities because there is an opportunity for sector rotation from expensive stocks to less expensive stocks.
The brokerage recommends investments in Asian emerging markets including Thailand as stocks in these markets are more related to the economic cycle than developed markets with more technology stocks.
Group stocks that are related to the economic cycle or traditional stocks that are not too expensive are also recommended.
There is a chance funds will continue to flow into the Thai stock market in 2021, so KGI suggests traders focus on energy, industrial estates, financial institutions and tourism stocks, which are expected to have passed their bottom in 2020.