Central banks all over the world are expected to start cutting interest rates by mid-2024, encouraging foreign capital to flow back to stock markets in Asia including Thailand, which should gain from intensified geopolitical conflicts, say leading economists.
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organizations, said global central banks' interest rate hikes, which started in 2022, are likely to reverse in the middle of 2024 and continue through to the end of the year.
"Lower rates would prompt a shift in capital movements, which have been drawn to the US market, and the Thai stock exchange is projected to benefit from that movement," Mr Kobsak told a Capital Market Symposium hosted by the Securities and Exchange Commission yesterday.
The rate cuts would happen as geopolitics intensify globally, potentially attracting more foreign investments to Asia where a number of infrastructure projects are under development, such as new airports in Cambodia and green energy campaigns across the region, he said.
Mr Kobsak's statement was in line with foreign economists forecasting the Federal Reserve will start cutting US interest rates next year as a mild recession appears in the first half.
Deutsche Bank economists, for instance, have projected rate cuts of 175 basis points next year, from 5.25%-5.5% down to 3.5%-3.75% by the end of the year.
Fed governor Christopher Waller, a hawkish and influential voice at the central bank, shifted his tone to be more dovish on Tuesday, leaving room open for Fed rate cuts in 2024, said KGI Securities.
Asia Plus Securities said the Fed may cut the policy rate to 4.5% in 2024, which would weaken the dollar and strengthen the baht, boosting fund inflows to Thailand.
According to the brokerage, foreigners have sold a net 186 billion baht worth of Thai stocks this year as of Nov 28, the fourth-largest net sales in 32 years on the Stock Exchange of Thailand, as confidence was shaken by More Return and Stark Corp fraud concerns, mid-year political uncertainty, and interest rate hikes from 1.25% to 2.5% at present.
Mr Kobsak said the Thai capital market needs to upgrade in several aspects to fully capitalise on the expected reversal of global capital movements.
First, stock market regulators have to tighten loopholes that allowed the Stark and More Return cases to occur, as well as other kinds of fraud, he said.
In addition, unrated bonds and small listed companies, which have been plagued by bond defaults lately, have to be addressed to restore trust in the capital market, said Mr Kobsak.
Regulations should be simplified to lower the cost for investors, while new assets such as cryptocurrencies and non-fungible tokens should be launched to attract new investments beyond traditional assets, he said.