CGS International Securities (Thailand) (CGSI) anticipates Thai stocks will remain lacklustre in the first half of 2025 as investors take a wait-and-see approach to Donald Trump's proposed measures.
If corporate taxes are reduced for American companies, capital is expected to flow out of emerging markets, including Thailand, said the brokerage.
Analysts at CGSI said US president-elect Trump's economic policies may cause US inflation to decline more slowly than the market expects.
Bloomberg projects the US Federal Reserve to cut the policy interest rate by 75 basis points to 3.75% by the end of 2025.
As a result, CGSI predicts the Bank of Thailand will trim its policy rate once in 2025, reducing it from 2.25% to 2.00%.
The government is expected to introduce stimulus measures to mitigate the effects of negative external factors, including the Phase 2 rollout of the digital wallet project, distributing funds to Thais aged 60 and older in January 2025.
The government is expected to inject around 40 billion baht into the economy for Phase 2 of the project.
In addition, the government plans to establish an infrastructure fund by September to repurchase the concessions for the electric train system in Bangkok.
The administration also wants to restructure problematic debts, specifically those that are less than one year in arrears, in the mortgage, hire-purchase and small business loan sectors, with a total value of 1.3 trillion baht.
The government also proposed raising the minimum wage to 400 baht per day.
Regarding the political situation, the Pheu Thai Party and Prime Minister Paetongtarn Shinawatra face more than 10 legal petitions. However, the brokerage's analysts believe the government will not be affected because the premier is not an executive of Pheu Thai, though she is the party leader.
In the worst-case scenario, even if Pheu Thai is dissolved, non-executive members could transfer to a new party, noted CGSI.
Given the unfavourable external factors, domestic stocks and those benefiting from the government's stimulus measures are considered the top investment options by CGSI. The brokerage recommends investment in the consumer, retail, healthcare, banking and industrial estate sectors.
CGSI advises reducing investment in the oil and gas, petrochemical and real estate sectors because of lower demand amid ongoing weakness in the global economy.
Earnings per share among Thai listed companies should grow by 3% in 2024 and 11% in 2025, while the brokerage maintains its SET index target for year-end 2025 of 1,630 points, which is equivalent to a price-to-earnings ratio of 16 times.
Some of its recommended stock picks are Amata Corporation (AMATA), Bangkok Chain Hospital (BCH), Carabao Group (CBG), Central Pattana (CPN), Central Retail Corporation (CRC), Muangthai Capital (MTC) and Siam Commercial Bank (SCB).
The brokerage has six investment themes for 2025: ESG stocks, which are expected to see greater demand from Thai ESG funds; stocks benefiting from the digital wallet project, including those in retail, banking, consumer goods and home improvement sectors; stocks gaining from foreign direct investment; complete entertainment venues; infrastructure mutual funds; and value-play stocks.
CGSI analysts identified upsides for the Thai bourse next year as a strong economic recovery driven by stimulus measures and higher than expected export growth.
Conversely, downside risks include domestic political uncertainty, increased geopolitical risks, slower than expected domestic and foreign interest rate cuts, and potential capital outflows from the Thai stock market, noted the brokerage.