SET still struggling to find momentum
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SET still struggling to find momentum

STOCK FOCUS

An investor looks at a stock display board in a trading room. (Photo: Pornprom Sarttarpai)
An investor looks at a stock display board in a trading room. (Photo: Pornprom Sarttarpai)

The Stock Exchange of Thailand (SET) failed to rally this past week despite some positive sentiment arising from a speech by former prime minister Thaksin Shinawatra about ways to revive the Thai capital markets.

Instead, the SET saw a sharp decline on Tuesday, driven by negative sentiment surrounding Delta Electronics, which triggered broader selling pressure. DELTA has faced intense scrutiny because its share price does not reflect fundamentals. Its price/earnings (PE) ratio of 80 times compares with a market average of 18.6.

For the remainder of the week, the market moved sideways, fluctuating between positive and negative factors. Notably, on Thursday Thai stocks underperformed global markets, despite a rally in US equities following a decline in bond yields after inflation data came in below expectations.

This divergence highlighted lingering concerns over second-wave inflation, but we maintain that such risks are unlikely to materialise in the short term.

In the coming week, global markets are poised for heightened volatility as attention shifts to the inauguration on Monday of United States President Donald Trump and potential developments in US trade policies. Investors will monitor speeches and policy announcements for insights into global economic implications.

Domestically, key themes include progress on recent government policy discussions, such as the proposed cut to the electricity tariff to 3.70 baht per unit, which would necessitate inter-agency cooperation, as well as measures to restore confidence in the Thai stock market, with the Securities and Exchange Commission (SEC) and SET seeking improved confidence.

Another critical focus will be bank earnings, as results must meet or exceed expectations to sustain positive market sentiment, given prior gains.

Investors will also watch for real-sector economic activity linked to the Easy E-Receipt programme, which has driven optimism about specific stocks. We expect the SET to remain volatile, trading within a range of 1,330 to 1,380 points, with selective opportunities for specific sectors and stocks. Among the positive factors:

Easing LTF sell-offs: The usual January sell-offs of maturing long-term funds appear to be gradually declining, with partial reinvestment expected through Thai ESG funds.

Bank earnings: Bank earnings reports due next week must meet or exceed expectations to sustain the rally. Dividend announcements could drive more buying, especially for high-yielding names such as KTB, TISCO and KBANK.

Medium- to long-term catalysts: Initiatives discussed during last week's policy session, such as promoting entertainment complexes, carbon credit trade, and investments in biotech and stem cell research, may continue to drive momentum, particularly if there is tangible follow-up action by government agencies in the coming weeks.

Treasury stock incentives: Policies encouraging treasury stock buybacks could support stock prices, particularly given the undervalued valuations of many Thai companies, which trade at deeply low PE and price-to-book value levels despite solid fundamentals.

Among the negative factors are global economic slowdown risks in the first half of 2025, including weaker consumer demand, geopolitical unrest and a trade war. Thailand is export-reliant and vulnerable to these global pressures. Other risks include:

Market confidence issues: Confidence in the Thai stock market remains fragile, with ongoing issues such as forced sales by major shareholders -- most recently highlighted by the RS case involving margin loans -- continuing to erode investor trust.

Commodity price volatility: Heightened geopolitical tensions could lead to sharp fluctuations in commodity prices, as global powers jockey for influence in the post-inauguration period.

By focusing on themes and navigating short-term volatility, investors can uncover selective opportunities.

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