ICI rises 1.6% as jabs boost investor sentiment
The Investor Confidence Index (ICI) for stocks in the next three months rose by 1.6% from the previous month and remains in the bullish zone as investors expect the Covid-19 vaccination programme to ease the pandemic situation.
The upcoming nationwide vaccination drive is the main factor amping up investor sentiment, followed by anticipation of local economic recovery and an increase in foreign fund inflows.
The top indices with the highest growth for the first five months of 2021 were WTI Crude Oil (36.7%), Vietnam Stock Index (20.3%), and Taiwan Stock Index (15.9%) while the Stock Exchange of Thailand Index (SET Index) rose 10%.
Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organizations (Fetco), said the third wave of the pandemic in Thailand is a strong factor impeding economic momentum while international conflicts and disappointing results of a meeting of the Bank of Thailand's Monetary Policy Committee in May is also undermining sentiment.
According to the survey, the most attractive sector is electronics while the least alluring is fashion.
The Thai stock market slid during the middle of the month following concerns over a hike in the US inflation rate, raising fears it might trigger the Federal Reserve to increase its policy interest rate and taper its quantitative easing sooner than the market expects. Moreover, US government bond yields may also rise.
The government's capacity to procure 100 million doses of Covid-19 vaccines and inoculate the majority of the population by this year will also be a crucial catalyst in regaining consumer confidence and make a positive impact on the country's economic recovery.
The Finance Ministry also recently proposed 500 billion baht of additional borrowing. The result of the MPC's meeting scheduled on June 23 will be the centre of focus, Mr Paiboon said.
The Interest Rate Expectation Index for June 2021 for five-year and 10-year government bond yields at the end of the second quarter moved down to the 'unchanged' zone.
The Index reflects the market's assumption that MPC will keep its policy rate unchanged at 0.5% at its meeting in June and will maintain the rate until the end of the year as the economy remains weak, said Ariya Tiranaprakij, deputy managing director of the Thai Bond Market Association.
She said five-year and 10-year long-term bond yields at the end of the second quarter are anticipated to move little -- since this survey was conducted on May 21 -- to 1.06% and 1.86%, respectively, although respondents were worried that the US inflation rate may cause the US Treasury yields to rise.
Factors factored in the anticipation included demand and supply flow in the debt market, global interest rate trends, and the local economy.