Despite the expected recovery on Tuesday, brokers are still seeing red on the Thai equity market this week.
SCB Chief Investment Office (SCB CIO) said the Stock Exchange of Thailand (SET) will continue to fluctuate on the downward path. This is due to outbreak of coronavirus outside China and the continued increase in numbers, especially in Europe and the US.
Their predictions are already reflected in the SET’s movement on Tuesday, as the index went up by more than 40 points from 1025 to 1067 at the opening, before trading back down to 1025 in less than an hour. The index went into intermission at 1039.30, up 14.84 points or 1.45 per cent from the previous day.
SCB-CIO pointed to the obvious main concern for investors; that the outbreak will slow down the global economy. Some economists are already seeing the US, the largest economy in the world, going into recession this year. Many also see Thailand going into recession this year.
The think tank said they are expecting investors to continue to be in the risk-off mode where they are buying up safe havens and avoiding risky assets, despite countries coming up with various unprecedented monetary and fiscal policies. The war on oil prices between Saudi Arabia, Russia, and the US is also putting more pressure on the SET as prices continue to decline from lessened demand and increased supply.
Globlex Securities said the partial lockdown of Bangkok and surrounding areas along with the work-from-home trend have led to an internal migration of workers from Bangkok to their home provinces. This could further spread the virus throughout the country. The outbreak is also worsening in Europe and the US, while more and more countries around the world are reporting their first cases.
The US Senate is still debating a nearly US$2 trillion relief package. The US’s unemployment could shoot up while oil prices are still fluctuating, meaning that external pressures will keep the SET in the range of 970-1100 this week.
“Investors are no longer looking at positive factors,” said Wilasinee Boonmasungthrong, research director at Globlex Securities.
She explained that investors are ignoring the fact that the deprecating baht is benefitting exports, which actually expanded 1.5 per cent in February, with the exception of gold, oil, and arms.
The central bank has already lowered the policy interest rate to 0.75 per cent and is coming up with measures to support the bond and the mutual fund markets. At the same time, the government is also coming up with fiscal measures and relief packages, but investors still prefer cash to equities at the moment, she added.
For people who still want to invest, the securities firm pointed to shares that are benefiting from the partial lockdowns, including MAKRO, BJC, CPALL, TU, and TFMAMA. Shares that are benefiting from people working from home such as ADVANC, INTUCH, DTAC, TRUE, JAS, JASIF, DIF, COM7, SIS, and SYNEX are also interesting.
For upcoming events, the Bank of Thailand (BOT)’s Monetary Policy Committee (MPC) will meet on Wednesday. SCB-CIO expects the MPC to lower the country’s benchmark lending rate by another 25 basis points to 0.50 per cent. The BOT is also expecting to release its new GDP and inflation predictions on Wednesday.
The Bank of England is holding a meeting on its rates on March 26, and the US will release its initial jobless claims number on the same day.