Thai shares moved sideways over the past week as the benchmark SET index built a new base 10 to 15 points higher than before. Three key investment flows were observed:
- Short covering in beaten-down blue chips;
- Sector/stock rotation, particularly in commerce and energy shares; and
- Trading buys with specific catalysts or news flows, such as crypto-linked plays amid the Bitcoin spike, and refinery plays following reports of a drone attack at a major refinery in Russia.
We also detected more buying interest in Alpha plays, or broad-based small to medium-sized stocks with positive stories, reflecting a return of punters and improving risk appetite for Thai shares. Most market players, however, are still in quick in-out mode with little consistency.
We expect the SET to move sideways in a step-up pattern in the coming week. However, macroeconomic factors -- both at home and abroad -- could substantially affect market movement and trigger more volatility.
We anticipate the SET index will trade between 1,365 and 1,420 points, or a narrower range of 1,375 to 1,400, barring any surprises. Among key factors to monitor are the US Federal Reserve policy meeting on March 19 and 20, the Bank of Japan meeting on March 18 and 19, and final consideration of Thailand's long-delayed fiscal 2024 budget bill.
POSITIVE FACTORS
Pending more clarity on external factors, we expect them to have only limited or temporary impact on the Thai market, but we see some positive domestic factors.
The fiscal 2024 budget is scheduled to be considered by the House on March 20-21 and the Senate March 25-26, then submitted for royal endorsement on April 3, paving the way for immediate disbursement. We see this progress as a key factor to drive a recovery of economic fundamentals, as well as earnings of Thai listed companies.
The push for public spending and investment right after passage of the budget bill could trigger speculation in building materials, construction and system contractors.
Sustained tourism momentum could ignite interest in trading buys in tourism-related shares ahead of earnings preview releases. In recent analysts' meetings, many have mentioned target price revisions for both airlines and hotels, pending more actual proof of volume increases.
Measures to control short selling and program trading, which have been blamed for malaise in the local market, are expected to take effect in the third quarter. Any reports about the issues or progress updates on preparations could be positive, given the market has already anticipated worst-case scenarios.
We maintain a similar view towards external positive factors in the medium to long run. US bond yields are clearly on the downtrend, pending the outcome of next week's Federal Open Market Committee meeting.
Inflows into emerging markets could pick up as investors take profits from developed markets after the initial Fed rate cut, expected in June.
NEGATIVE FACTORS
Among the negative factors are the same old global problems, comprising the Russia-Ukraine conflict and Middle East/Red Sea tensions.
The US presidential election campaign has begun in earnest, with the Biden and Trump campaigns starting to stake out positions on foreign affairs.
Donald Trump could again highlight a tariff wall that could obstruct international trade and affect China's economy, which would have implications for supply chain links with Thailand.
On the other hand, such a move could provide opportunities for Thai industrial estates as manufacturers look at relocation within Asia.
Chinese authorities have clearly indicated they will not bail out distressed companies that have suffered from overexpansion in the property sector. The market previously anticipated more aid.
This could be interpreted to mean any liquidity injections that do take place will be for economic stimulation rather than plugging leaks.
We have yet to monitor how much liquidity the state plans to inject and into which elements of the economy.