Tourism stocks jump on reopening hopes
Tourism-related stocks rallied yesterday from optimism surrounding the recent announcement the country is scheduled to fully reopen in October, but the overall SET Index sagged 0.44% based on news from the Federal Reserve.
The Fed on Wednesday signalled an interest rate hike may happen sooner than expected, dampening stock market sentiment in the short term.
The SET Index yesterday dipped 0.44% to close at 1,617.65 points in trade worth 88 billion baht. Asia Aviation (AAV) increased 10.7% to close at 3.1 baht.
KTBST Securities (Thailand) executive vice-president Mongkol Puangpetra said the announcement about the country's reopening led to positive sentiment in the Thai stock market, with the prospect of an accelerated vaccination scheme expected to allow a reopening in mid-October.
Thailand has distributed about 7 million doses of Covid-19 vaccines. If 10 million doses are distributed per month, 50 million people will have received their first jab by mid-October.
At this rate of vaccination, Thailand could reopen faster than previously expected.
The reopening should be positive for the overall economy, with KTBST projecting consumer spending among both domestic and international tourists to recover quickly.
However, whether foreign tourists will return as expected also depends on the policies and pandemic situations in other countries.
If other countries continue to impose travel restrictions on their citizens, Thailand's reopening may be less successful, said KTBST Securities.
Some European countries and the US allow fully vaccinated visitors to enter without quarantine. Countries in Asia are expected to gradually follow suit.
However, the Chinese government remains very cautious about handling the epidemic.
The tourism industry and airlines are the main beneficiaries of an October reopening, according to the brokerage. Stocks in these sectors include Airports of Thailand (AOT), Asia Aviation (AAV), Bangkok Airways (BA), Erawan Group (ERW), Central Plaza Hotel (CENTEL), Minor International Plc (MINT) and Siam Wellness Group (SPA).
In addition to tourism, other sectors and stocks expected to benefit from the reopening are: commerce, including listed firms Central Retail Corporation (CRC), Central Pattana Plc (CPN) and Berli Jucker (BJC); industrial estates, with Amata Corporation (AMATA) and WHA Corporation (WHA); healthcare, with Bangkok Dusit Medical Service (BDMS) and Bumrungrad Hospital (BH); banks, with Kasikornbank (KBANK); ground transport, with Bangkok Expressway and Metro (BEM) and BTS Group Holdings (BTS); gas stations, with PTG Energy (PTG), PTT Oil and Retail Business (OR), Esso (Thailand) (ESSO) and Bangchak Corporation (BCP).
Research from Maybank Kim Eng Securities (MBKET) has an optimistic view about the government's ability to reopen the country in October, saying the reopening will help expedite Thailand's economic recovery and positively affect some stocks.
However, despite the good news, results from the Fed's meeting on Wednesday eroded sentiment in the global stock market as it signalled the US government is likely to raise interest rates by 0.5% from the current 0-0.25% in 2023, a year faster than the previous forecast.
The news may cause the risky asset market to slow down in the short term.
However, the Fed announced it will keep the interest rate unchanged at 0-0.25% and maintain the quantitative easing (QE) limit at US$120 billion per month this year.
The Fed also upgraded the US GDP forecast for 2021 to 7% from 6.5%, and lifted the forecasts for 2022 and 2023 to 3.3% and 2.4%, respectively.
The US inflation rate is expected to tally 3.4%, up from the previous forecast of 2.4%, while forecasts for 2022 and 2023 are upgraded to 2.1% and 2.2% from 2% and 2.1%, respectively.
There is still no clear sign of QE tapering, but it may start next year.
"The news of interest rate hikes will depress the market in the short term. We recommend accumulating stocks with good fundamentals to wait for the economic recovery, such as those in electronics, food, energy, property, banks and insurance," MBKET's research stated.
Trinity Securities rated the reopening announcement with a "neutral" view.
Nuttachat Mekmasin, executive director of Trinity Securities' research department, said how the announcement is viewed depends upon the appetite and willingness of investors, foreign travellers and local residents, such as whether they are willing to make visits or spend time outdoors.
"If the number of new daily cases remains high or the vaccine adoption rate remains low, the reopening announcement might not make a significant impact initially," said Mr Nuttachat.
But in the short term, the news could boost stocks in related sectors such as tourism, hospitals, retail and industrial estates, he said.