The Stock Exchange of Thailand (SET) index has the opportunity to rebound significantly, approaching 1,700 points this year as global interest rates stabilise and the government stimulates the domestic economy, says InnovestX Securities.
InnovestX, the financial investment flagship of SCB X Group, said the outlook for the first quarter of 2024 could be volatile, with potential economic setbacks in the US leading to continued interest in bonds as attractive investment assets.
However, the Thai stock market presents numerous opportunities and is expected to become more appealing to long-term investors because of undervalued equities, noted the brokerage.
"The SET presents numerous opportunities for long-term investors as it features stocks with prices significantly lower than their intrinsic values," said chief research officer Sukit Udomsirikul.
Asian stock markets are more intriguing than leading markets such as the US and Europe due to their sustained high growth rates. With inflation rates adjusting downwards, there is a likelihood of increased foreign capital flowing into Asian stock markets, particularly when the value of the US dollar weakens, he pointed out.
Senior economist Piyasak Manason said developed economies like the US and Europe are entering a period of slowdown, leading the Federal Reserve to potentially reduce interest rates by 1% in the first half. Meanwhile, China's economy is gradually recovering with support from monetary policy easing. However, it still faces structural challenges, particularly deflation.
"We believe digital wallet measures are a crucial factor driving Thailand's economic growth. If the measure is launched as the government expects, it could expand the economy by 4.1%. Without the 10,000-baht digital handouts, we anticipate a more modest expansion of 3.2%," he said.
Chief commercial officer Pichai Lertsupongkit said that when interest rates peak, bonds and gold tend to provide favourable returns, while stocks continue to exhibit volatility.
"We believe investing in foreign markets remains crucial and is an attractive option for investors due to the diverse range of alternative assets and greater investment opportunities," he said.
Senior analyst Sutthichai Kumworachai said that in 2024 central banks worldwide, apart from Japan, are expected to start lowering interest rates.
InnovestX recommends an asset allocation for this year emphasising high-quality debt instruments, including government bonds and corporate bonds with investment grade ratings or higher, that could benefit from the expected decline in interest rates.
Investors should also opt for Asian stocks, including those in Thailand, which are more attractive than developed markets due to the recovering economy, as well as global stocks in the second half of 2024 as the economy rebounds, with a focus on value and cyclical stocks.
The brokerage also recommends investment diversification into alternative assets such as gold and real estate investment trusts, he said.
Mr Sukit said that besides economic and interest rate trends, geopolitics is poised to introduce fluctuations to financial markets.
"Potential impacts on the economy may stem from conflicts affecting energy and food prices, as well as disruptions in transport and broader economic warfare, such as the US-China tensions. It is essential to observe China's stance towards Taiwan after the presidential elections and the US presidential elections in November, which could have consequences for the Russia-Ukraine conflict," he said.
Another factor which is challenging to predict but crucial not to overlook is climate change and natural disasters, said Mr Sukit.