Foreign capital started to flow into the Thai stock market in the first week of February, tallying 7.9 billion baht in anticipation of global interest rates falling later this year, says the Stock Exchange of Thailand (SET).
Pessimism on lower than expected economic growth in the final quarter of 2023 triggered cuts to listed companies' 2023 profit growth and fund outflows from the bourse in January, said Soraphol Tulayasathien, senior executive vice-president of the SET.
But for the first four business days of February, foreign fund inflows totalled 7.9 billion baht based on global sentiment that interest rates will decline, said Mr Soraphol.
"However, whether such investment is short term or long term, we will have to wait and see the trading volume for the entire month of February," he said.
"It is possible there are long-term funds giving higher weight to investing in the Thai stock market."
In January, the Thai index closed at 1,364.52 points, down 3.6% from a month earlier, with daily turnover averaging 47.1 billion baht and foreign investors cashing out 30.9 billion baht.
"Despite the offshore fund pullback, foreign investors' shareholding value compared with market capitalisation remained close to the historical average," said Mr Soraphol.
Moreover, the Thai stock market's price-to-book value was still low, while the dividend yield rose to 3.24%.
The Federation of Thai Capital Market Organizations' (Fetco) Investor Confidence Index (ICI) fell to the bearish zone last month, pressured by lower than expected economic growth and contracted exports.
January's ICI, which reflects investors' view on the market condition over the next three months, was 77.6, down 43.4% from the previous month. Confidence fell across all categories, clouded by 2023 GDP, which expanded only 1.8%, while trade partners' economic slowdown hurt exports, which contracted 1%.
Tourism recovery is tipped to be the most positive cue, followed by the government's stimulus packages and listed companies' earnings. The Federal Reserve keeping its policy rate steady, inflation and economic slowdown have dented confidence.
Investor sentiment was dampened by external factors, including mounting concerns the Fed may begin its dovish move slower than earlier anticipated, China's sluggish economy and weakened property sector, and conflicts in the Middle East, said Fetco chairman Kobsak Pootrakool.
External factors to monitor include easing policy rates in key economies such as the US and Europe, as well as China mobilising 2 trillion yuan to prop up the capital market, he said.
According to the SET, foreign investors sold 30.9 billion baht's worth of Thai shares in January after they were net buyers the preceding month. Their trading ratio was higher than any other types of investors for 21 consecutive months.
The Thai stock exchange's forward price-earnings (P/E) ratio at the end was 15.5 times, above the Asian stock market's average of 12.9 times. The historical P/E ratio stood at 16.7 times, also exceeding the Asian stock market's average of 14.7 times.
The dividend yield ratio, however, was 3.24%, below the Asian stock market's average of 3.31%.