A better-than-expected upswing in tourism from China’s re-opening and the likely fillip to domestic consumption make Thai stocks the top pick for JPMorgan Chase & Co in Southeast Asia.
A historical run-up in the market prior to general elections and continued margin expansion for corporates from easing energy and raw material costs will also help stocks listed on the Stock Exchange of Thailand (SET) outperform the broader market in the region, excluding Vietnam, according to Kae Pornpunnarath, head of Thai equity research for JPMorgan.
Chinese tourist arrivals are seen helping double the country’s tourism revenue to US$39 billion this year from a year earlier, or equivalent to about 6% of the nation’s gross domestic product, according to JPMorgan. The bank estimates total foreign tourist arrivals to surge to 26 million this year, or about 65% of the total arrivals in 2019, the year before the pandemic.
“We are very positive on China’s reopening. When we think about tourism, that’s where Thailand stands out,” Mr Kae said in an interview.
JPMorgan predicts the benchmark SET Index to rise about 7% further to reach a near record 1,800 this year, with the bank remaining overweight on companies in the consumer staples, consumer discretionary and healthcare sectors.
The gauge gained about 4% in the past month, bolstered by a rally in electronic, energy, and consumer staples stocks. Global funds have poured a net $566 million into Thai stocks this month, after a drawing a record $5.96 billion last year, according to data compiled by Bloomberg.
Thailand’s stock market has rallied about 5-6% on average in the three months leading upto elections in the past, followed by some profit-taking later, Kae said. The kingdom is slated to hold a vote in May with the House of Representatives due to complete its term in March.
With domestic demand set to remain strong, JPMorgan counts are recommending stocks such as convenience store operator CP All Plc and Home Product Center Plc, a retailer of building materials and home improvement products. It also prefers utility stocks such as Global Power Synergy Plc that are seen as “defensive” plays against a global economic slowdown, Mr Kae said.
Although the return of Chinese tourists is seen as a boon for the aviation industry, valuation and share price of Airports of Thailand Plc already reflect investor expectations and upside is seen "limited", Mr Kae said.
"When we look at the positive spillovers from cyclical upsides - China’s reopening and to some degree Japan’s reopening - Thailand and Hong Kong are among the primary beneficiaries," said Wendy Liu, chief Asia and China equity strategist.