UOB Asset Management (UOBAM) expects the Stock Exchange of Thailand (SET) index to top 1,440 points in the second half of the year, and recommends investors are overweight in global bonds amid market volatility.
Supported by the global momentum of interest rate cuts, Thailand's tourism growth, economic stimulus and accelerated budget spending, UOBAM expects the Thai stock market to reach 1,443 points, said deputy chief investment officer Vannachan Ungthavorn.
Developed economies are expected to lower their interest rates in the second half. The Bank of Thailand's Monetary Policy Committee could possibly cut the policy rate by 0.25 percentage points in December.
Recommended Thai stocks are tourism-related and those set to benefit from growing government spending and economic stimulus, such as retail and utilities, she added.
"The Thai economy, however, needs to address structural issues. The industrial sector is facing competition from other countries that have higher competitiveness," Ms Vannachan said.
"As the global economy slows down and trade barriers increase, Thailand's industrial sector needs to adjust itself to turn around business, and this process takes time."
Meanwhile, households and the small business sector are burdened with debt, affecting their purchasing power. Financial institutions have begun to feel the impact of increasing non-performing loans, prompting them to impose stricter lending requirements which consequently cause tighter financial conditions for households and SMEs, she noted.
Ms Vannachan said UOBAM believes the US economy is likely to slow down, but not to the point of recession.
"If the Federal Reserve cuts interest rates this year, it will help increase liquidity into the capital market," she said.
The global economy is expected to slow down in a soft-landing manner. Therefore, risk management amid uncertainties is vital. UOBAM thus suggests investors carefully select the assets to invest in and appropriately diversify their risk, she noted.
"Investors are recommended to reduce holding cash and overweighting their investment in global corporate debt instruments, particularly investment-grade ones, which are likely to get attractive returns during a downward interest rate cycle," she said.
At the same time, greater caution must be exercised when investing in Asian stocks, especially in China.
"Despite the attractive value, the Chinese market has already absorbed positive factors while the recovery is still facing challenges," she said.
UOBAM's deputy chief marketing officer Kulachat Chandavimol said factors to monitor in the second half include tight monetary policy, inflation, and geopolitical risks, particularly in the US, Europe and the Middle East, all of which would hurt investment sentiment.
