The Thai equity market started 2025 with several pieces of bad news. First, the global minimum tax issue loomed over the market, with numerous large-cap stocks expected to be required to pay a minimum rate of 15%, hurting their earnings.
DELTA, one of the companies expected to pay more tax, dragged down the Stock Exchange of Thailand (SET) index as the year kicked off.
Fears associated with the legacy long-term fund investment programme also hit the market as all of these funds are now eligible to be sold in 2025, with an estimated value of at least 200 billion baht.
Next came the news the management of RS used the entertainment company's stock as collateral for margin loans and were eventually forced to sell. This created panic as investors sought to identify other stocks with margin loans.
Overseas, the inauguration of Donald Trump as US president heightened fears of a new trade war, causing yields on the US 10-year bond to shoot up to 4.8% and the stock market to fall further.
Lastly, reports that CP Group might take part in a costly management buyout of the Japanese 7-Eleven operator Seven & i fanned worries about the group's listed firms and dampened confidence in the Thai bourse. The SET closed January at 1,314.50 points, shedding 85.71 points or 6.1%, with average daily turnover of 38 billion baht, down 4.8% from the month before.
In early February, Trump announced 25% tariffs on goods from Mexico and Canada and 10% on products from China. Though the tariff hikes on Mexico and Canada were subsequently delayed by at least 30 days, the market mood, especially in Asia, is still negative.
This week brought news that reciprocal US tariffs on numerous countries could be imposed as soon as April. Analysts predict India and Thailand are the two countries in Asia that could face the biggest hit.
Elsewhere, the emergence of China's DeepSeek fostered some panic selling in January of US artificial intelligence (AI) stocks, especially Nvidia. DeepSeek's model throws cold water on the belief that huge capital expenditure is necessary for AI.
At current valuations, China's technology stocks are more attractive than those in the US, so the investment mood in the American market has soured a bit in recent weeks.
For the local market, there were lots of downward revisions for 2024 earnings as results announcements trickled in, pressuring the SET as we can expect more downgrades to 2025 earnings as well.
On the positive side, bank results came out slightly above market expectations, helped by better credit cost controls and lower operating expenses, especially for IT. With the SET dipping back below 1,300 points this week, only the banking sector has generated a positive return for the year-to-date.
FEBRUARY PICKS
In February, investors should look for stocks with good earnings profiles and potential for strong dividends.
Our picks for this month are the property developer AP, the trading firm Berli Jucker (BJC), Krungthai Bank (KTB) and Thai Asphalt (TASCO).
- AP has long been a top pick for its dividend potential, consistently offering a yield of more than 6% per year. AP's net profit in 2024 is expected to decline 15% year-on-year, but we believe the developer will get its mojo back in 2025 with profit growth of 19%. AP continues to launch new projects, many of which are mid- to high-end, offering more protection from sluggish economic conditions. We estimate a yield of up to 7% for this year.
- BJC has become our new top pick for the commerce sector. The company's strategy is to focus more on the food segment, leading to better margins and volume. As this strategy was only implemented starting in the second half of 2024, we expect net profit for the year to be down by 19%. However, with the impact of the shift to be felt throughout 2025, including a focus on personal care products, we project a big jump of 41% in profit this year. With the news of the potential buyout of 7-Eleven shares in Japan clouding the picture for CPALL, BJC is our top pick for commerce.
- In the banking sector, KTB is our top pick after reporting fourth-quarter net profit of more than 1 billion baht. Importantly, its credit cost improved even as its net interest margin declined from increased lending to the government sector. Non-performing loans have been declining as government loans are more secure. KTB also has a high yield of more than 5% this year.
- TASCO is our new favourite stock for this month. We believe its profits for the fourth quarter last year and 2025 will show impressive growth. The government budget for fiscal 2025 was approved on time and state expenditure gained in the fourth quarter. We expect more motorway and road construction to take place in 2025 as a result. TASCO's net profit this year should show a big turnaround with 62% year-on-year growth. TASCO is also considered a solid dividend stock; we project a yield of almost 7% this year.
