The Stock Exchange of Thailand was volatile in April, which features a long holiday period. In the lead-up to the Songkran festival, the SET was hit hard by US President Donald Trump's tariffs announcement, touching its lowest level in years at 1,056.41 points early in the month.
Stock markets worldwide were not spared by the tariff news. On the flipside, the gold price surged past $3,300 per ounce.
After Songkran, the SET stayed volatile but with an uptrend, while the US market declined by more than 5%. Gold continued to climb as it is considered a safe haven during times of high uncertainty, reaching $3,500 before pulling back slightly.
After Thai banks announced better earnings in the first quarter than expected, the SET moved up steadily and closed at its peak for the month at 1,197.26 points, up 3.4% from the month before. Helped by the volatility, average daily turnover edged up 2.3% to 40 billion baht.
Trump's tariffs shocked the world as they proved much higher than expected. However, he soon announced most would be delayed by 90 days. A basic tariff of 10% still applies to most imports, with China a notable exception.
The US tariff on China was pushed up to 145%, while China retaliated with a 125% rate on US imports, essentially nullifying the incentive for trade between the two countries.
The world is watching as these two economic giants negotiate, with exploratory talks scheduled for this weekend in Switzerland. Some other countries plan to negotiate amongst themselves, rather than with the US, aiming to find trade partners to ease the impact of US tariffs.
We note US GDP entered the negative zone based on the ramping up of imports before tariffs take effect. In addition, the West Texas Intermediate crude price slumped to below $60 a barrel on demand-side fears, as well as a decision by Opec+ to increase production to regain market share.
Against this backdrop, the dollar weakened while many Asian currencies strengthened, including the baht to around 32.70 to the dollar.
Over the past week, a number of global markets jumped back to their pre-tariff announcement levels, though uncertainties and strange patterns are still clouding the investment outlook.
In Thailand, we have entered the results season. Thai banks already released their first-quarter numbers, with profits around 10% better than expected.
Looking ahead, myriad uncertainties remain, including monetary policy. The Bank of Thailand announced its second rate cut of the year (25 basis points to 1.75%) in late April. Exports are expected to be hit by tariffs, while the tourism industry looks weaker, with Chinese arrivals down 20-30% year-on-year.
With the two main growth engines struggling, we believe the central bank could move to cut rates at least one more time in the second half of 2025, potentially to less than 1%.
OUTLOOK AND PICKS
Our investment theme continues to focus on stocks with solid fundamentals and domestic-facing businesses. We picked the transport operator Bangkok Expressway and Metro (BEM), the retail and convenience store group CP All (CPALL), the energy and communications group Gulf Development (GULF) and the food processor Food Moments (FM).
- BEM is expected to report first-quarter profit of 871 million baht (up 3% year-on-year and 3% quarter-on-quarter). The collapse of a portion of the expressway to Rama II Road resulted in closure of part of the tollway for three weeks. In addition, the recent earthquake negatively affected tolls at Din Daeng for a few days, while an increase in remote work after the quake decreased car usage and MRT passenger numbers. Despite these impacts on revenue, we expect BEM to show resilience with some Q1 profit growth. We also believe its second-quarter performance will record growth, with profit reaching a new high for the company.
- Looking at commerce, we like CPALL as both of its business units, retail and wholesale, are picking up steam. CPALL's retail business is still strong, backed by its convenience store arm that is focusing on ready-to-eat and ready-to-cook food. We project first-quarter net profit of 6.8 billion baht, up 8% year-on-year. Although growth could be affected by the recent weakening in tourism, we believe CPALL is still one of the target stocks for Thai ESGX funds that will start trading later this month.
- After completing its merger with INTUCH, GULF has resumed trading on the SET. Its balance sheet is getting healthier with net gearing at only 0.89 times. The company now has much more potential for expansion, especially in renewable energy projects. Indeed, we expect the new power development plan to include up to 34.9 gigawatts of renewable energy by 2037. Moreover, with satellites (THCOM) and mobile (ADVANC) now under its umbrella, GULF can expand into new territory such as data centres. The company also increased its stake in KBANK to 3.49%, making it the bank's fourth-largest shareholder. This could help secure funding for further business expansion.
- Finally, FM is an exceptional case for our stock picks this month. The company is export-focused, but its US market exposure is quite small, so it will not be impacted much by Trump tariffs. We expect revenue to reach 10 billion baht within three years and project first-quarter net profit at 185 million baht (up 52% year-on-year and 2% on the quarter). FM also has the lowest price/earnings ratio in the Thai food sector at 6 times and has a high dividend yield of more than 6% per year, making it a good value investment.