Thai shares continued to move sideways up, with the SET index struggling to clear 1,380 points (the next hurdle will be 1,400) throughout the past week, causing the market to stay rangebound.
Market movements were driven by mixed results for individual stocks. By sector, tourism and related stocks as well as agri-food companies that focus on meat products reported solid earnings.
Those reporting negative surprises were property (slowing demand from unusually high loan rejection rates) and automotive (in line with lower production). Certain stocks such as the debt management specialist JMT moved in contrast to results, possibly because investors were once more buying on facts after a previous sell-off.
In the coming week, we will continue to focus on individual factors as companies are holding analysts' meetings to provide management guidance after earnings announcements. We think this round could produce some meaningful turning points after many companies delivered positive surprises in first-quarter results.
For instance, TRUE and CPF turned profitable sooner than expected, CRC showed signs of business recovery in Vietnam, and tourism plays gained from a potentially buoyant low season this year.
In addition, farm income has turned positive, while government budget disbursement could accelerate in the second and third quarters, given the limited time frame before a new fiscal budget takes effect in October.
The latter half of this month will be the final period before new short-selling rules become effective, expected sometime in June. Therefore, we expect the SET index to breach 1,380 and march towards 1,400 to establish a new base.
Among the positive factors, combined first-quarter earnings of listed companies grew 4% year-on-year and 67% quarter-on-quarter. The latter beat our estimates by 14 percentage points and the market consensus by 7 percentage points.
The results are considered positive surprises and should trigger market optimism.
Some 44% of listed companies delivered better than expected earnings (up from 37% in the fourth quarter of 2023) with a broader base improvement. The performance reflected a conservative market and participants may look to fine-tune their forecasts.
We could see valuation re-ratings for shares with excessive discounts, and/or upward forecast revisions during analysts' meetings over the coming two weeks.
Meanwhile, key macro indicators such as US inflation and retail sales are clearly slowing down, renewing hopes that the Federal Reserve will move sooner on interest rate cuts.
We detected warnings against investment in markets that have hit new highs, which could encourage funds to shift to laggards such as the SET.
BlackRock, the world's largest asset manager, recently warned that a weak yen could drive foreign funds away from the Japanese bourse. The Nikkei has surged 14% so far this year, outperforming most other markets.
But for dollar-denominated investors, the return on investment from the Japanese stock market rose by a mere 3%, reflecting the portfolio adjustment views of foreign funds investing in developed markets such as Japan.
We have also seen signs of a pause after the recent run-up in gold, which was fuelled by Chinese demand among other factors. We believe funds used for gold speculation earlier could shift to a choice of assets, such as Thai, Chinese or Hong Kong stocks and bonds, which could gain on an interest rate downtrend.
THAI OUTLOOK
Locally, the Federation of Thai Capital Market Organizations (Fetco) is scheduled to meet on Tuesday to discuss new criteria for Thai ESG and Super Savings Funds (SSF), as well as consider proposals to support savings, such as reintroducing Long-Term Equity Funds (LTFs).
We think LTFs could attract Thai money from overseas investments, making the Thai bourse shine again, assuming the LTF requirements are similar to the previous ones, with the only difference being the holding period.
Among negative factors, the government's plan to raise the daily minimum wage to 400 baht in October is still unsettled.
More than 200 organisations in the private sector expressed their opposition, while the tripartite national wage committee said it is still assessing conditions and expects to resolve the matter at its meeting on June 19.
A minimum wage hike could boost purchasing power, but will raise costs for operators, particularly small businesses.
We expect the relevant parties to clarify the potential impact of a higher minimum wage before proceeding. In the end, wages might be set by province as usual, rather than as a blanket nationwide rate as favoured by the government.
