We are entering the seventh month in which the Thai stock market is in limbo and stuck in sideways mode. Sentiment for global risk assets in general continues to be influenced by external macro factors such as:
War risk in the Middle East that has driven up gold and oil prices but dragged down global equities.
Domestic and overseas interest-rate cuts that might not materialise as quickly as previously anticipated. At its last meeting on April 10, the Monetary Policy Committee of the Bank of Thailand voted 5 to 2 in favour of keeping the policy rate at 2.5%. In the United States, most economists have now abandoned expectations of an initial rate cut in June. One Federal Reserve member said last week that it might not be appropriate to cut rates at all this year.
The Thai market seems to have retreated in advance of these factors and, therefore, moved at a relatively less volatile pace and not in sync with the direction of global stocks and other assets.
Given that the aforementioned macro factors appeared to have had limited influence on Thai stocks recently, we expect investors this week to focus their attention more on earnings of Thai listed firms.
Over the past several quarters, earnings of listed companies have generally disappointed investors and made Thai shares relatively unattractive. Therefore, we see first-quarter earnings as the key variable that could determine the direction of certain sectors or individual stocks. Among the positive factors:
Our preliminary second-quarter model points to aggregate net profit after tax of listed companies to grow by 18% year-on-year and 8% quarter-on-quarter. Core earnings look set to rise by 9% on the year and 10% from the last quarter.
We currently expect 12 sectors to post year-on-year core profit growth (the same as in the first quarter), in particular Food (strong demand for pet food and consumer beverages), Transport (recovery in traffic), Industrial Estates (increasing pace of land transfers), Media (higher out-of-home media revenue, big concerts and more events), Energy (higher sales volume and average selling prices for PTTEP, bigger crude runs and fatter gross refining margins).
Among the negative factors investors should watch for is softening consumer spending as the impact of the post-Covid release of pent-up demand fades.
As well, a paucity of government stimulus measures has eroded confidence in the prospects for exposed sectors -- chiefly Automotive (weak domestic demand), Property (weak demand), and Chemicals (slimmer petrochemical spreads).
In contrast, upward revisions in profit forecasts are being seen for Contractors (a surge in new state projects as 2024 budget funds finally become available) and Information and Communication Technology (easing competition).
Among other risks, keep an eye on the possibility of weaker economic growth (global and Thai), geopolitical tensions and trade conflicts, and higher-for-longer interest rates.