A sell-off this week in a few heavyweight stocks pulled the benchmark SET index down to a bottom of 1,237 points, the lowest since the depths of the Covid crisis in November 2020.
Delta Electronics and Airports of Thailand (AOT) fell dramatically early in the week. DELTA was pressured by results that were about 50% weaker than expected, as well as an overhang related to legal expenses, while growth prospects this year do not put it among growth stocks. Moreover, its rich valuation caused the stock fall at a steeper than usual pace.
AOT was weighed down by concerns about liquidity at King Power, its main duty-free contractor, which could lead to additional provisioning if the latter cannot pay concession fees. With less promising prospects for profit sharing from duty-free business, some analysts downgraded the earnings outlook for the airport operator, while trimming the share valuation as return on equity might also slip. However, AOT clarified concerns and confirmed that it has no plan to reduce the minimum guarantee specified in the duty-free concession.
Selling pressures came mainly from funds for portfolio adjustment and to escape the impact from hefty sell-offs via short-selling transactions. However, some foreign investors began to re-accumulate Thai shares amid short covering and speculation on a rebound, following hefty declines in key blue chips.
FINAL RUSH OF EARNINGS
The coming week will bring the last of the fourth-quarter 2024 earnings announcements, with dozens of companies still to report. Many listed firms will also hold analysts' meetings, offering insights into their outlook for the remainder of the year.
Major stocks that could sway with earnings and weigh on the overall index include CPALL, CPF, KCE, HANA, BDMS, OSP, SAWAD, BEM, AWC, BGRIM, AMATA and CPN. Companies conducting analysts' meetings include TOP, WHA, KCE, AWC, OSP and CBG. We expect the SET to remain within the trading range of 1,240 to 1,280 points in the short term.
We also expect movements related to US President Donald Trump and China to affect global assets, not only stocks but also alternative investments. The meeting this week between President Xi Jinping and bosses of major Chinese tech firms could signal further moves in the China-US tech rivalry and more global stock volatility.
We do not see many fresh positive factors to propel the Thai stock market, other than the push for new tax-saving funds. Market regulators are considering new long-term equity fund (LTF) investments and transitioning existing holdings in maturing LTFs to Thai ESG funds. This is intended to promote trust and confidence, while supporting ESG investment to enhance market stability during a volatile period.
Finance Minister Pichai Chunhavajira said the economic stimulus policy committee would meet in late February or early March at the latest to consider the third phase of digital wallet programme for registered individuals. It is expected to start sometime in the second quarter.
GROWTH OUTLOOK DIMS
Among the negative factors, Thailand's economic growth in 2024 fell short of expectations at 2.5%. Private consumption grew 3.4%, but that too was short of expectations, implying the cash handout programme may have had limited stimulus impact as household debt remains high.
Meanwhile, private investment in the fourth quarter shrank 2.1% year-on-year, the third consecutive quarterly contraction, particularly in the auto industry.
We expect Thailand's GDP growth to slow this year to 2.4% as a base case amid global trade uncertainties, while household debt will continue to weigh on purchasing power and an influx of cheap goods from China will deter private investment.
Finally, keep in mind the quarterly MSCI rebalancing planned for the end of February. PTTGC and TOP will be moved from the MSCI Global Standard index to the MSCI Small Cap index, while GPSC and SCGP are added to the Small Cap index. Stocks removed from the Small Cap index are BSRC, DCC, ERW, GFPT, KAMART, PSG, PSH, SAPPE, STECON, THG and TIPH.
