Amid global risks, investment themes for Thailand

Amid global risks, investment themes for Thailand

The global economic and investment landscape at the beginning of 2024 bears some similarities to the start of last year. Stock markets that are performing well -- Japan, the US and Europe, as well as India -- have advanced in the range of 3-15%, while emerging markets such as Thailand, Hong Kong and China have shrunk by 2-5%.

This is in line with world economic data, in particular the purchasing managers' index (PMI) figures of large economies, which continue to expand.

The outlook is encouraging even though some important indicators such as GDP, retail sales and industrial production have slowed, amid falling inflation after central banks raised interest rates to the highest levels in decades. Overall, the world economy still faces a variety of risk factors, which can be described in three groups:

1. Monetary policy risk: After two years of tightening monetary policy by central banks to eliminate inflation, concerns have arisen about the financial system, from rising bond yields to commercial real estate to the health of banks.

2. Political and policy risks: Around 4 billion people worldwide will vote this year, with the US election likely commanding the most attention, which will come with unpredictable consequences.

3. Geopolitical risks: From conflicts in Ukraine and Israel to the Red Sea and Taiwan, analysts are using terms such as "polycrisis" and "new world disorder" to describe rising anxiety levels.

However, the global economy has been relatively resilient in the face of these risks. At the start of 2023, most economists thought a global recession would occur, but global GDP is still growing by around 3%.

Data from the US investment bank Goldman Sachs indicates global economic activity is as buoyant now as it was in 2019 before the pandemic. Weekly GDP readings produced by the OECD show similar results, while measures of global activity as reflected in PMI point to strong growth worldwide.

Important risk areas such as geopolitics do not appear to be a big problem. There's not much evidence indicating that attacks on shipping in the Red Sea are hurting the economy that much.

PMI data suggests producers are factoring in longer delivery times as more cargo vessels and tankers take the long route around the Cape of Good Hope. This increases the distance between Shanghai and Rotterdam to 23,000km from 18,000km.

In any case, shipping costs are only a small part of overall product prices. As a result, inflation is likely to rise only slightly.

Our analysis reveals geopolitical risks are increasing at an above-average rate. The Geopolitical Risk Index is 148.3, well above the average of 111.4 since 2020.

However, it is lower than in the early months of the Russia-Ukraine war in 2022, when it reached 300.

Meanwhile, economic policy risk, measured by the Economic Policy Uncertainty Index, is 254.4, down from the three-year average of 263.9. This is likely because interest rates are starting to decrease as inflation falls, causing bond yields to decrease.

In light of these figures, our analysis found there is not much of a relationship between the economy and geopolitical risks. Meanwhile, reduced policy risks are helping the world economy to expand steadily.

Even amid a polycrisis, we believe as long as geopolitical risks do not lead to a full-blown regional or world war, it is possible the global economy will continue to expand, albeit at a slower pace, but we should see a soft landing.

Yet we remain cautious as we have seen how higher interest rates retard growth.

The Russia-Ukraine war or a broader Middle East conflict could trigger another round of energy supply disruptions, leading to rising inflation.


In Thailand, the economy in the fourth quarter of 2023 expanded by 1.7% year-on-year, well below the market consensus of 2.5%, but close to our expectation of 1.8%.

Full-year growth was a disappointing 1.9%. We have four observations about the Thai economy:

  • GDP contracted in the fourth quarter by 0.6% from the previous quarter, seasonally adjusted. This was in line with many countries that also contracted, which indicates the global economy is weakening.
  • The Thai manufacturing sector has recently been characterised by under-production and continuous running down of inventories.
  • If the world economy performs this year as we predict -- slowing but with a soft landing -- Thai exports and manufacturing will face more risk.
  • Thai products face a challenge from Chinese market dumping. This is widening the Thai trade deficit at a time when China is supplying 9% of domestic consumer products -- up from 5% in 2020. If this trend continues, it will affect the Thai manufacturing sector.

Given the various risks, we adjusted our forecast for the Thai economy downward in 2024, based on two scenarios.

If the government's digital wallet stimulus is implemented, the economy will expand by 3.7% (down from an earlier forecast of 4.1%).

Without the digital wallet, we expect growth of 2.8% (down from 3.2% predicted earlier), while the Bank of Thailand may be able to cut interest rates twice this year.

In terms of investment strategy, we recommend selective buys based on two main themes: stocks expected to benefit from the recovery of the foreign tourist market, namely AOT and MINT; and long-term investments based on dollar-cost averaging, comprising BBL, BDMS, BEM, CPALL, PTT and SCC.

Dr Piyasak Manason is head of economic research at InnovestX Securities Co Ltd, a subsidiary of SCBX group.

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