Sentiment turns bullish on vaccine optimism
The Investor Confidence Index (ICI) for August, which anticipates market conditions for the next three months, spiked to 144.37, entering "bullish" territory with a 124.3% surge from the previous month.
The Federation of Thai Capital Market Organizations (Fetco) forecast the Thai GDP to grow 4% and the SET Index to reach 1,800 points next year.
Meanwhile, the Thai Bond Market Association (TBMA) expects the Monetary Policy Committee (MPC) to maintain the interest rate at 0.5% at the upcoming meeting on Sept 29.
According to the TBMA, the Thai bond market has recorded a huge net inflow of 110 billion baht this year thanks to baht appreciation, a more positive outlook on the Thai economy, and declines in Covid cases from the previous quarter.
Investors believe the pandemic situation is improving based on vaccine distribution, which is the strongest supporting factor for the capital market, followed by the prospect of a local economic recovery and fund inflows, according to the index.
The ongoing spread of the Delta variant, followed by local political uncertainty and international conflicts are the most concerning factors pressuring market sentiment, said Paiboon Nalinthrangkurn, chairman of Fetco.
External factors to monitor include the Federal Reserve's meeting in September. If a hawkish outlook on inflation and interest rates is signalled, the global stock market may be pressured, he said.
Investors should also consider other central banks' meetings, although the European Central Bank, Bank of Japan, and Bank of England are expected to keep their policy rate unchanged.
The situation in Afghanistan could also intensify, affecting the global economy, said Mr Paiboon.
The most attractive sector this month is banking, while the least attractive sector is fashion, according to the index.
Local investors are monitoring whether the infection rate will rebound after the easing of lockdown measures allowed some businesses to resume operations.
The focus will also be on the import of alternative vaccines, especially mRNA jabs that are expected to arrive in Thailand sooner than expected, he said.
According to Fetco, Thai GDP is expected to record 0-0.5% growth this year and 4% growth next year thanks to the low base this year and the government's continuation of its economic stimulus package.
Fetco forecast the SET Index to reach 1,800 points next year thanks to export growth and an eventual recovery in the tourism sector, which is expected to attract at least 10 million visitors next year. Stocks expected to benefit from the country's reopening are also recommended, according to Fetco.
Ariya Tiranaprakij, deputy managing director of TBMA, said the MPC is likely to keep its policy rate unchanged at 0.5% at its meeting on Sept 29.
The yields of five-year government bonds at the end of the third quarter are expected to remain unchanged from the date on which the ICI survey was conducted -- Aug 23 -- while yields of 10-year government bonds are expected to rise, according to TBMA.
Foreigners have bought around 110 billion baht of Thai bonds the first eight months this year.
Half of them are short-term bonds, implying these investors are speculating on baht appreciation or settling for short-term bonds before moving to stocks, said TBMA.