Despite a significant rebound this week, the Thai stock market should remain volatile given the trade war, according to BBL Asset Management (BBLAM), which recommends investors diversify their investments to overseas markets with a focus on Europe and China.
Europe and China are more attractive than the US market, where stock valuations are high. For Thai equities, the focus should be on defensive stocks such as those in the healthcare sector and high-dividend stocks, said BBLAM.
Isara Ordeedolchest, deputy managing director and head of investment research at BBLAM, said the trade war remains highly uncertain and could affect Thai economic growth.
Some research houses cut their Thai GDP growth projections to less than 2%, while exports are expected to decline due to United States President Donald Trump's tariffs.
"We still don't know the extent to which Thailand will be affected by the tariffs, which could go as high as 36%, depending on the outcome of trade negotiations," said Mr Isara.
"Therefore, investors need to be cautious and diversify to international equities to preserve investment returns."
Although US tech stocks have delivered strong returns recently, they are now considered overvalued.
US companies also face bans from certain trade partners, which could negatively impact their performance, according to BBLAM.
In contrast, European stocks have been sold off for years, pushing prices down. However, the industrial, technology and banking sectors continue to grow steadily in that market.
In addition, Chinese stocks are attractive because of the government's plans to stimulate domestic consumption, and they have greater growth potential compared with US stocks given their lower valuations, said Mr Isara.
As for Thai equities, selective buying is recommended, particularly in sectors less affected by the trade war, such as hospitals, utilities and banks, noted BBLAM.
On Wednesday the Bank of Thailand's Monetary Policy Committee (MPC) cut its policy rate by 25 basis points to 1.75% to stimulate the economy, which may benefit sectors such as real estate, he said.
However, it could take up to a year and a half to determine whether purchasing power and investment in Thailand will truly pick up.
It remains to be seen whether banks will extend more credit, while the MPC will likely cut rates further at its next meeting in six weeks, said Mr Isara.
Many economists and analysts expect the MPC to cut rates more than once this year, as the current outlook remains unpredictable, he said.
Meanwhile, the new Thai ESG Extra (ESGX) Fund is considered a timely investment opportunity for investors seeking tax benefits, noted BBLAM.
To accommodate interest in Thai ESGX, the asset manager plans to launch three new funds focusing on both dividend-paying and growth stocks. The offering period runs from today until June 30.