The Thai stock market was quite volatile in early December, bucking the regional trend and hitting a three-year low at 1,355 points. The rapid drop led some investors to give up hope for a revival before the end of the year.
However, the SET has since staged a concrete rebound after the US Federal Reserve sent clearer signals about interest rate cuts in 2024, with three reductions now expected instead of two forecast previously. This has reinforced market views that the tightening cycle has ended and an easing cycle will begin within six months.
Comments from local market regulators regarding program trading -- a major problem in the view of many small investors -- also lent support.
Assuming the practice is not banned, we believe there will be fairer and more acceptable regulations that will bolster investment sentiment late this year and early next year.
Key gainers recently have been rate-sensitive stocks such as electronics (usually reliant on growth stocks and US tech plays) and financial firms. Among individual stocks, DELTA surprised the market by staying in the SET50, while shipping company shares were boosted by indications that more seaborne trade will be avoiding the risky Red Sea.
Trading volume in the final week of the year is usually thin, particularly from foreign investors during the holiday season. However, this should be a positive factor for the Thai market as short-selling and program trading are tools most commonly used by foreign investors.
Retail and local institutional investors have a chance to accumulate shares for window-dressing purposes as more money flows into TESG funds. Look for stocks with solid fundamentals and bargain prices heading into 2024.
We expect the SET index to see-saw within a range of 1,380 and 1,420 points as buying sprees offset profit-taking.
Among the positive signs, several macroeconomic factors that had been pressuring equities have eased.
US bond yields are on a clear downtrend, economic indicators in many countries have not delivered any negative surprises, and optimism over Thai economic policies could help the SET to build a new base in the short run.
Among the key factors to monitor in 2024:
Optimism the global economic slowdown will take the form of a soft landing. This means only mild economic turbulence in the stock market, no recession, and a potential recovery in the upcoming period. It is widely expected the Fed will start cutting rates from the middle of next year.
Emerging markets will register better economic growth than developed markets. This should lead to greater fund flow to emerging markets -- especially laggards like Thailand -- than developed markets, at least in the first quarter of 2024, before a reality check kicks in.
The Thai economy is projected to grow 3.4% in 2024, improving from an expected 2.3% this year. Key growth engines in the first half of 2024 include tourism, domestic consumption and exports, which are expected to expand from a low base and restocking demand from China.
In the latter half of 2024, investors should monitor expectations of state policies, which should accelerate as the government budget is expected to be approved in the second quarter, while the export sector relies on global market conditions.
Based on statistics since 2000, the SET is unlikely to post two consecutive years of declines.
Among the negative factors and risks to watch are:
Slowing global economic growth, which remains too fragile to be certain. The crucial concern is the possibility, albeit diminishing, of a US recession that could affect other countries.
Economic risks in China, particularly in the property sector, which has yet to be fully resolved.
Domestic political risk and the possibility that policies may not resemble what was expected.
Geopolitical risks amid ongoing turmoil and the US presidential election next year.