Thai shares rebounded in line with global bourses last week, shortly before falling back closer to 1,200 points. Early in the week, the market was driven by euphoria over the prospects for a US-China trade deal. Washington cut tariffs on Chinese goods to 30% while China trimmed its rates to 10% for 90 days.
Taken together with the outcome of a US-UK deal calling for 10% tariffs, the market now anticipates a negotiation range of between 10% and 30% for other countries, which could be good news for Thailand which faces a 36% rate.
Meanwhile, President Donald Trump chose to deal next with Middle East countries by sealing deals for planes, weapons and semiconductors while inviting them to invest in data centres and AI by using US chips and equipment.
Domestic politics remain a pressuring factor for Thai shares. Concerns include the debate on the fiscal 2026 budget bill scheduled for late May amid reports of growing disagreements among coalition parties, and the upcoming court hearing on June 13 on former premier Thaksin Shinawatra's hospital stay.
Equities have been weighed down despite decent first-quarter earnings of listed firms, which mostly beat or met expectations. Meanwhile, the tourism sector is seeing far weaker-than-expected Chinese arrivals, amid signs that they have shifted to other destinations. This puts pressure on domestic consumption and tourism-related stocks.
Investors should continue to closely monitor local politics this week and look for signs of a potential cabinet reshuffle. Any signs of a reduction in tension between the two largest coalition parties would ease market worries and could ignite a brief rebound. Investors would then shift their focus to the 2026 budget negotiations.
Excluding domestic political turbulence, sentiment for Thai equities could be lifted by the start of US trade negotiations with more countries. Treasury Secretary Scott Bessent said on May 14 that Thailand, Indonesia and Taiwan had proposed very good offers, while Washington is about to strike deals with Japan and South Korea.
Finance Minister Pichai Chunhavajira has outlined a five-part strategy proposed to the US and is awaiting a response in the next two weeks. The proposals aim to reduce the trade surplus with the US within five years.
MARKET OUTLOOK
Overall, we project three scenarios for the SET Index range this week:
- Base case: No fresh progress with fluid domestic factors but hopeful on the external front. The SET Index is expected to move in the range of in 1,190 to 1,220 range.
- Worst case: Unstable political factors. The index is expected to move between 1,150 and 1,200.
- Best case: Settled political negotiations and trade deals. The index could trade between 1,250 and 1,300.
Among positive factors, easing trade tension would significantly help sentiment. It is not only about Thailand securing a favourable deal with the US, but also about seeing similar momentum for the supply chain in Asia, making good deals for Taiwan, South Korea and Japan just as important. Meanwhile, there should be no fresh substantial negotiations by China, though discussion of minor issues would be acceptable.
Earnings of most Thai listed companies either beat or met expectations, yet stock prices did not rise much. In fact, shares of companies whose earnings fell short of expectations were heavily sold off. This implied that the market was overshadowed by excessive fear, leaving upside for potential improvement of the overall situation.
Investors should monitor ongoing meetings between securities analysts and listed company executives for their views on Q1 results and the outlook for the rest of the year. Many are expected to discuss the trade war's impact on their respective industries. Current market prices reflect expectations between base- and worst-case scenarios, which tilt towards a conservative stance.
Barring any surprise, comments from company management should not reflect much on the negative side, much of which had already been factored in. On the other hand, if their views are not as negative as anticipated, we could see analysts re-rating some sectors.
Among negative factors, domestic political tension could escalate beyond expectations as some interest groups or political parties might use the Thaksin case to attack the government and negotiate with the coalition-leading Pheu Thai Party.
Meanwhile, economic fundamentals are getting weaker than the government's projections, with tourist arrivals contracting and an upturn in complaints by entrepreneurs, particularly retailers.
On the external front, China's exports have sharply exceeded expectations, which may not be a positive development. This is because the growth came mainly from a double-digit rise in shipments to Asean markets including Thailand, suggesting attempts to cut inventories and reroute US-bound shipments to escape high tariffs.