Capital inflows will move towards risky assets, especially in Asia including Thailand after the International Monetary Fund (IMF) revised its world GDP growth estimate for 2021 from 5.2% to 5.5%, a signal the economic impact of the pandemic may have receded, predicts Asia Plus Securities (ASPS) Research.
According to ASPS Research, IMF's GDP growth projections for many Asian countries are relatively higher than those in other regions. India is expected to grow by 11.5%, China by 8.1%, and Malaysia by 6%, while the US is projected to grow by only 5.1% in 2021.
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As the US stock market has been bullish recently, there is a high possibility that foreign funds will move to Asian bourses, which have been sluggish compared with the US, said ASPS Research.
There is a chance more funds will flow into the Thai stock market in the next quarter, said the research house.
According to the IMF, Thailand's economic growth outlook for 2021 is 2.7%, similar to predictions from other analysts in a range 2-2.5%. ASPS Research projects the Thai economy will grow by 2.5% this year.
The IMF is primarily concerned with the emerging variants of Covid-19 and renewed waves of infection.
As Thailand's measures to curb the outbreak have been fairly effective, with mass vaccination poised to begin in February, it is likely the Thai bourse has already passed rock bottom, said the research note.
"Thailand's economic outlook is better this year, which should boost Thai listed firms' profits in 2021 as businesses have a chance to recover faster. This factor will drive more funds to enter the Thai stock market this year," said Takit Chardcherdsak, manager at ASPS Research.
ASPS Research recommends investors focus on fundamental stocks with a prospective rise in profits following the economic recovery, such as Bangkok Dusit Medical Services (BDMS), Infraset Plc (INSET) and Osotspa Plc (OSP).
BDMS can expect a better performance this year as the hospital reported more domestic patients in November 2020 and expects the return of foreign patients after the easing of travel restrictions.
INSET, the country's main player in digital infrastructure such as 5G and data centres, expects net profit growth of around 15-20% for the next two years.