Stocks edge lower as measures take effect
The Thai stock market led by tourism, food, construction, and real estate stocks declined yesterday following the government's order to close construction camps and prohibit dine-in services in the hard-hit areas of Bangkok and its vicinities, analysts said.
The SET Index dropped 0.22% yesterday to close at 1,579.17 points with trading worth 68.84 billion baht. Airports of Thailand (AOT) dropped 2.36% while Bangkok Dusit Medical Services (BDMS) dipped 2.53%.
Therdsak Thaveeteeratham, executive vice-president at Asia Plus Securities (ASPS), said the government's decision to halt some economic activities to curb the pandemic has greatly affected construction and restaurant businesses in the dark-red provinces.
The restrictions are expected to have a negative impact on many industries and will reduce the efficiency of stimulus measures set to start in July.
"The control measures will hinder economic recovery and cause negative sentiment in the stock market where there have been no new fund flows," Mr Therdsak said.
Capital Nomura Securities (CNS) research said investors will avoid investing in restaurant stocks for now as they will be heavily impacted.
After You Plc (AU) will suffer the most as its revenue mostly comes from business in Bangkok and the surrounding provinces.
CNS research expects the earnings of restaurant stocks in the third quarter to decline as they did in the second quarter. However, the loss is expected to be less than in the second quarter last year when a nationwide lockdown was imposed.
"The uncertainty of the pandemic still remains. Vaccine rollouts have been delayed and the success of reopening through the Phuket sandbox is not certain. Investors should wait for stocks related to economic recovery, which are expected to record net profit in 2022 from this year's low base," CNS research stated.
Mongkol Puangpetra, executive vice-president of KTBST Securities, said the closure of worker camps in Bangkok and other dark-red areas for at least 30 days will affect 2021 net profit of many companies in construction.
According to KTBST Securities, Thai stocks expected to suffer a drop in net profits include SEAFCO (-8%), CH Kanchang (CK) (-6%), Pylon (-6%), Sino Thai Engineering and Construction (STEC) (-4%), and Right Tunnelling (-2%). SEAFCO, CK and PYLON currently account for more than 90% of the backlog in the dark-red areas while STEC and RT contribute around 50% and 25%, respectively.
Mr Mongkol said the pandemic situation will improve in the second half of the year and that the recent outbreak is a short-term negative factor on prices.
Despite the short-term impact, construction stocks are expected to continue growing in the second half of the year as there are still many pending large-scale construction projects.