Trinity Securities cautioned investors to be wary of selling pressure in May, especially during the week after the general election, as the market may fluctuate ahead of the meeting of the Bank of Thailand's Monetary Policy Committee (MPC) at the end of the month.
Nuttachart Mekmasin, executive director of the research department, said the brokerage expects the Stock Exchange of Thailand (SET) index to improve in the first half of May due to internal and external factors.
An election rally usually occurs two weeks before the polling date, driving by speculation in domestic-play stocks.
Regarding external factors, it is less likely that the Federal Open Market Committee this week will surprise the market by lifting the rate by more than 0.25% based on the state of the US economy and concerns in the banking sector.
"But in the second half of May, especially around a week after the election, investors are advised to exercise more caution," said Mr Nuttachart.
"In the event that the winning political party is unable to get the majority of votes, this could lead to the sell on fact phenomenon in the market the week after the poll, based on statistics from the previous elections," he said.
If the MPC meeting on May 31 resolves to raise the interest rate by 0.25% to 2%, it will lead to a contraction of the price to earnings ratio (P/E) in the market, he added.
An electronic board shows the fluctuating prices of SET-listed shares to retail investors. Pornprom Satrabhaya
Asia Plus Securities (ASPS) said buying is more likely than selling this month with fund flows especially after the general election.
"Statistically, in the years that the SET index fell in January-April, selling is unlikely in May. Thus, we expect robust buying in May," the research division at ASPS said in a report.
The SET index stands at around 1,500, lower than the first-quarter average of 1,645. But the index is projected to rally in the final bend before the election as usual since political parties' policies mostly focus on solving economic problems and massive stimulus budgets.
"The SET index has an 80% probability of rising by 2.09% on average in the two weeks before the election and an 80% chance of rising by 3.8% on average in the week after the election, driven by fund inflow," it pointed out.
The Thai economy has been on a recovery path. The Bank of Thailand's outlook showed the economy in March improved from February, thanks to a rebound in domestic demand.
Exports totalled 934 billion baht, which is higher than usual, and imports amounted to 785 billion baht, resulting in a trade surplus of 148 billion, it added.
ASPS expects the SET index to be around 1,610 points with limited upside. Yet, it should be a good short-term profit taking point from late in the June quarter to early in the third quarter.
Based on earnings previews on firms making up one-third of market cap, the brokerage estimates the combined first-quarter profit to grow 79% from three months earlier and 2% higher than a year earlier, it added.