
The hot topic in the Thai stock market this past week has been the investment by CP Axtra (CPAXT) in The Happitat within The Forestias multi-use real estate project by Magnolia Quality Development Corp (MQDC), also part of the Charoen Pokphand Group.
In response to investors' concerns about demand for the enormous and pricey Forestias project, CPAXT clarified that it had only invested in rental properties such as community malls and office space. But there were also corporate governance concerns since the two companies involved are part of the CP Group. There was a knock-on effect as well on shares of the 7-Eleven operator CPALL, the parent of CPAXT, which operates the Makro and Lotus's chains.
The bulk of the selling of CPALL and CPAXT shares involved portfolio adjustments by institutional investors, as well as intraday program trading. Around midweek, the US Federal Reserve and Bank of Thailand interest rate meetings also fuelled volatility and dragged the SET Index back to consolidate around the 1,400 mark.
Thai shares for much of this year have been recovering slowly, in line with regional bourses like the Philippines and Indonesia, while South Korea has been the worst performer. But the SET may struggle to better its end-2023 close of 1,415.85 points, given this week's losses.
Meanwhile, other key markets such as the US, Taiwan, Vietnam, Hong Kong and China have posted more than 10% gains. All in all, the Thai stock market in 2024 has fallen short of expectations and seems out of step with the mood and tone of global bourses, similar to what we saw in 2023.
In the final week of 2024, we expect the SET to remain in consolidation mode, with a slimmer chance of year-end window dressing by fund managers and brokerages. We anticipate the SET Index to trade in a range between 1,390 and 1,430 or, at best, stay flat for the month.
Potential gains hinge on heavyweight stocks such as DELTA and CCET, along with the interlinked GULF, ADVANC and INTUCH, together with banking counters like KBANK, KTB and BBL. Other blue chips in the commerce and tourism sectors, by contrast, seem to have faded.
However, investors should not focus too much on the overall market outlook. Instead, we recommend investing in individual plays with specific catalysts such as BTS and VGI, which are poised to receive cash and restructure for a new business cycle.
CAUTION AHEAD
In terms of investment strategy in early 2025, investors should be more cautious as we are in the late stage of the current business cycle. We recommend focusing on winners in global late-cycle themes including defensive big-caps in staple goods, ICT, power, healthcare and food. Meanwhile, chemicals, property, building materials, packaging and automotive shares are expected to perform poorly.
Positive factors: Year-end window dressing remains possible, though we see a slimmer chance. A potential rebound of beaten-down stocks could build positive momentum for trading early next year.
On the domestic front, investors should monitor additional stimulus measures, particularly those that improve consumer spending power. We see a high probability for the repeat of measures such as the Easy E-Receipt.
Negative factors: Thailand could face higher risk from the global economy in the first half of 2025. Based on our study on the relationship between the global and Thai economies and earnings of Thai listed firms from 2009 to the present, we found Thai and global GDP revisions were in sync in the pre-Covid period as the Thai economy relied greatly on external factors.
For example, exports accounted for 65-70% of GDP and inbound tourism accounted for about 12%. During global downturns, Thai GDP growth forecasts were trimmed by 2-3 times those of global projections on average.
However, Thai GDP growth forecast revisions have been in contrast with global trends post-Covid. Despite higher global GDP growth during the past 2-3 years, Thai GDP expansion has dropped because of domestic structural factors. These include a significant rise in household debt and shrinkage in net flows of foreign direct investment, in contrast with the regional uptrend.