Tisco Advisory recommends investors opt for foreign bonds, real estate investment trusts (REITs) and healthcare and technology stocks to hedge against negative factors next year.
Nattakrit Laotaweesap, head of wealth advisory at Tisco Bank, said the world economy in 2024 is expected to slow compared with this year as tighter monetary policy has had a clear impact on economic activity.
As a result, profits of listed companies globally could be downgraded based on the economic conditions, he said.
"Tisco expects interest rate hikes in this cycle have ended. Central banks are expected to gradually reduce their policy interest rates in 2024, leading to a decline of government bond yields," said Mr Nattakrit.
"The bank recommends investing in three themes to earn profits amid negative factors."
In Tisco's view, bonds and REITs are asset winners because they consistently generate cash flow.
Investors in bonds have the opportunity to receive both a high rate of return when held until maturity, and can enjoy an increase from the coupon rate when the central bank cuts interest rates, said the bank.
Tisco recommends investing in funds focused on government bonds, private-sector debt instruments with a credit rating of AA- or higher, and those with a medium to long-term maturity.
Bonds issued by developed countries, such as the US and Europe, are expected to offer a good yield of more than 5%, said the advisory.
For REITs, prices dropped by 20-30% between 2022-23 as high inflation prompted central banks to continuously hike interest rates.
The valuation of REITs in the US, Singapore and Thailand are attractive again, with price-to-book (P/B) ratios of 1.86, 0.87 and 0.80 times, respectively, the lowest levels in five years.
REITs in central business districts with high economic activity usually have high demand, are less affected by the economic environment, and benefit from changes in population structure, Tisco said.
For stock winners, the bank chose healthcare and technology because their performance is usually less affected by economic conditions.
In the past, the price of healthcare shares increased slightly compared with global stock exchanges, but the trend for 2024 is reversed as the group is projected to have growth of 18.8%, the highest among sectors, according to Tisco.
For technology stocks, Tisco recommends those related to artificial intelligence (AI) because there are higher adoption rates in organisations across many industries.
Though technology stock prices have risen this year, they are still undervalued because companies' operating results are likely to grow by as much as 17% in 2024, said the advisory.
In terms of country winners, Tisco believes stocks in Asian nations, especially South Korea, Taiwan and Vietnam, have factors driving growth and earnings per share (EPS) higher than in other markets.
North Asian economies are home to several technology companies and semiconductor industries.
The South Korean government has developed an innovation system and regulations in line with industry expansion, resulting in the growth of 376 companies, of which roughly 25% focus on developing AI technology.
Bloomberg anticipates in 2024, the EPS of listed companies in South Korea will return to growth of 54% year-on-year.
Most funds are underweight in South Korea relative to the benchmark index and there is a chance the stock market there will see a return of fund flows, said Mr Nattakrit.
The Vietnamese stock market has an EPS of 29.6% year-on-year, with a low forward price-to-earnings (P/E) ratio of only 9.39 times, which is similar to the level during the pandemic and the real estate crisis in 2022, said the advisory.
The Vietnamese exchange will benefit when interest rates decline as investors shift to riskier assets, he said.
The bourse is likely to receive fund flows from foreign investors when it is upgraded to an emerging market from a frontier market, supporting the market valuation with a higher P/E ratio in the future, said Mr Nattakrit.