Bualuang Securities (BLS) is bullish about prospects for the Thai stock market in the fourth quarter, saying tourism-related businesses would play a key role in driving economic growth and the SET Index could reach 1,705 points by the year-end.
Tourism should fully recover in 2023 with the SET Index poised to surge dramatically to 1,800 points, as banking stocks continue their growth, said the brokerage.
BLS deputy managing director Chaiyaporn Nompitakcharoen said as inflation has started to ease and the oil price passed its peak, investors are more encouraged to invest in the Stock Exchange of Thailand (SET) in the final quarter, particularly in stocks that outperform the market. As a result, there is a chance for a stock market rally in the last quarter of 2022, he said.
For 2022, BLS set a SET Index target of 1,705 points. Listed companies' net profits are projected to grow 9.2% this year, with expected earnings per share (EPS) of 98.2 baht.
The figures for next year are estimated at 10.6% growth and EPS of 107.4 baht.
Mr Chaiyaporn said the fourth quarter may see the US cut its balance sheet and launch quantitative tightening to suck money out of the system quickly in order to tame inflation.
The US Federal Reserve has hiked its interest rate this year to strengthen the dollar, aiding the business sector as they can import products at lower prices. Commodity prices have also gone down.
The US 10-year bond yield is expected to peak at 3.5% either this quarter or the final quarter, he said.
Mr Chaiyaporn says inflation has started to ease and the oil price passed its peak.
"In the short term, the stock market is likely to be volatile before the Fed meeting in the third week of September. If the Fed increases the interest rate by 0.75%, this is not a surprise because the market already anticipated that," Mr Chaiyaporn said.
He said based on the economic recovery, growth stocks will be able to adjust better than value stocks, namely hospitals, commerce, food and media, which should be resilient to inflation and consumption changes.
BLS recommends investors cut their portfolio in stocks that are sensitive to rate increases, such as those in the finance, real estate and construction sectors.
Banking stocks are worth investing in this year, said Mr Chaiyaporn, as concerns about asset quality for small and medium-sized enterprises improved. That is a positive for the retail banking sector, for which validation remains low, he said.
The brokerage advised investors to adjust their asset allocation to equity 65%, gold 10%, property funds 10%, and the rest held in cash.
Investors should wait and see how political factors develop and when the next elections will be held, which is most likely in February next year, said Mr Chaiyaporn.