Choppy week ahead for Thai stocks

The Stock Exchange of Thailand fell more than expected this week and has slipped beyond our support range. The surprisingly weak performance reflected rapid rises in US bond yields following the US Federal Reserve’s aggressive 75-basis-point interest rate increase.

The US benchmark is now between 1.5% and 1.75%, and the latest so-called “dot plot” of forward guidance by policymakers puts the year-end rate at 3.4%.

Despite a brief rebound after the announcement of the Fed decision, the SET and other bourses quickly resumed their downtrend on mounting worries about a steep rise in financial costs amid fragile global economic conditions.

Losses locally were led by energy and commodity plays — the most vulnerable and sensitive to interest rates and economic conditions.

We anticipate a further stock correction in the coming week. Given the downside for commodity and telecom stocks due to high market cap and the fact that they had recently outperformed the market, the SET could dive as deep as the low 1,500s. However, we remain hopeful that banks and many small and mid-caps will defy the overall market consolidation mode.


Since the Thai stock market relies heavily on commodity stocks (particularly oil), the energy price downtrend clearly has an adverse effect on the benchmark index. The SET also outperforms many bourses during an oil price upswing.

Amid fragile global economic conditions, equities will be hit periodically by negative news such as weak economic indicators and earnings forecasts of listed firms after the second-quarter period ends.

Key macro factors to monitor include the US personal consumption price index — an inflation gauge that Fed policymakers pay close attention to — which will be released on June 31. That will be followed by a CPI update on July 13, two weeks before the next Federal Open Market Committee meeting on July 26-27.

Locally, we expect earnings forecast downgrades for listed firms in many sectors…


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