US President Donald Trump's trade war rhetoric and the US Federal Reserve's interest rate normalisation are risks inducing volatility in the domestic stock market this year, says CLSA Securities (Thailand).
But the bourse's outlook remains bullish assuming Thailand's general election, investment in the Eastern Economic Corridor (EEC), and an investment roadmap for infrastructure development projects materialise as planned, said Prinn Panitchpakdi, country head for CLSA Securities (Thailand).
The global stock markets are rattled and concerned with remarks made by Mr Trump on the possibility of a trade war sparked by imposing a hefty tariff on steel imports into the US, said Mr Prinn.
"I think it is unlikely to happen, but investors are worried and this remains a concern causing investors to refrain from investing in high-risk assets in emerging markets, leading to a short-term appreciation of the US dollar," he said.
"I believe the US cannot start a trade war over the medium to long term because American conglomerates will be hurt as these multinationals have to trade with their global partners, so the move makes no sense."
Another negative factor is the new US Federal Reserve chairman has stated it is likely the Fed will hike interest rates four times this year, exceeding market expectations of a three-time rate normalisation, said Mr Prinn.
Fears of four rate hikes in a year are overblown as the US economy is still recovering gradually and there are some weaknesses to be assessed before a rate-hike decision, such as the unemployment rate for small and medium-sized businesses, he said.
"Both Trump's [rhetoric] and the Fed's rate hike are not as fearsome as investors are currently anticipating," said Mr Prinn.
The country's general election timeline, investment in the EEC, and an investment roadmap for infrastructure development projects are three key factors being closely monitored by foreign investors, he said.
The election will stimulate economic growth, while the EEC and infrastructure investments will directly help shore up consumer spending and the government can use fiscal policy to draw funding sources for investment projects, said Mr Prinn.
If these three events happen, they will help generate greater confidence among the private sector and investors in Thailand's economic outlook, he said.
With an improvement in global GDP projected, demand and supply of commodities are expected to increase, which will lend support to the Thai stock market as energy stocks make up the majority of shares in the Stock Exchange of Thailand (SET) index.
CLSA Securities (Thailand) views the SET index's resistance between 1,900-2,000 points in 2018, with support projected at 1,700 points.
Amonthep Chawla, head of research at CIMB Thai Bank, said releasing inventory products through exports as well as enticing foreign direct investment and implementing a tax incentive for foreign workers working in the EEC are methods to enhance private investment in Thailand.
"Private investment remains sluggish, but it is believed it will improve starting from the middle of this year and will be an engine driving Thailand's GDP growth," said Mr Amonthep.
CIMB Thai Bank forecasts Thailand's GDP growth at 4% this year, but a revision could be made depending on February's economic figures, he said.