The Stock Exchange of Thailand (SET) index rose above 1,400 points on Wednesday as investors believe the Bank of Thailand issued a clear sign it is ready to cut interest rates later this year to shore up the economy, after it held rates unchanged at its meeting.
The index shot up to 1,401 points in early trade on Wednesday, following an increase of 0.94% on Tuesday, with foreign investors net buyers of Thai shares for four consecutive days. The index closed at 1,398 points midday.
In afternoon trade, the bourse accelerated above 1,400 points again.
Paradorn Tiaranapramote, first vice-president of Asia Plus Securities' (ASPS) research division, said as Thailand's consumer price index (CPI) dropped for the fourth consecutive month in January and the Commerce Ministry predicted inflation is likely to decline again this month, it is likely inflation will dip in the first quarter of 2024 compared with the same period of 2023.
The January CPI fell 1.11% year-on-year, greater than the forecast of a 0.82% drop and the lowest level in 35 months, mainly attributed to the government's energy subsidies and lower raw food prices.
Core CPI rose 0.52% year-on-year for the period, the lowest in two years and lower than in most countries.
"The readings clearly showed the Thai economy really needs a boost in terms of both fiscal and monetary policies," he said.
Although the central bank's Monetary Policy Committee (MPC) kept interest rates unchanged as widely expected at its meeting on Wednesday, Mr Paradorn said the committee would send a clear signal it is ready to cut the rate to shore up the economy if needed.
"If that kind of statement is made, it boosts investor confidence that the country's monetary and fiscal policies are aligned and will move consistently from now," he said.
ASPS projects the MPC to ease monetary policies in 2024 because of several negative factors.
"Thailand is at risk of a technical recession, when GDP falls two quarters in a row, while we forecast 2024 GDP growth of 2.8%," the brokerage said in a research note. "As the Federal Reserve is expected to start cutting interest rates in mid-2024, Thailand's interest rate could be cut 1-2 times this year."
Sarawut Techochavalit, senior director of securities analysis at RHB Securities (Thailand), said the central bank has room to slash rates by up to half a percentage point this year.
"As headline inflation has fallen since November and the economy expanded only 1.8% in 2023, we believe the MPC may cut rates by 0.25-0.5% in the second half," he said.