Bualuang Securities (BLS) has cut its year-end estimate for the Stock Exchange of Thailand (SET) index to 1,396 points from 1,466 points, noting the Thai bourse will remain volatile the last four months of 2024.
Managing director Chaiyaporn Nompitakcharoen attributed the lower target to risks for Thai exports slowing as economic growth eases among key trading partners, notably the US, as well as uncertainties in both global and domestic politics.
"The Thai stock market's return in local currency this year ranks as the worst among Asian bourses," he said.
While the SET contracted by 6.1% through the first eight months of the year, the Taiwanese stock market ranked first with a return of 25%, followed by Vietnam at 15% and Japan 14%. The Chinese bourse shrank 3.6% during that period.
"The Thai stock market has underperformed for two consecutive years. In the middle of last year, the index fell by more than 10% after profits of listed companies grew less than expected at 3% year-on-year in the first half as a result of slow government budget disbursement," said Mr Chaiyaporn.
"The proposed digital wallet project still faces hurdles, while the new government needs to deal with an influx of low-priced products from China that mar Thai small businesses."
BLS projects the SET to trade at a forward price-to-earnings ratio of 15.60 times by year-end, with listed companies' profits growing 7.5%, improving in the second half thanks to recovering tourism and exports.
"The year-end target excludes the digital wallet project, which is still developing and could launch later this year," he said.
"Cash handouts would have a positive effect on the economy and stock market in the short term, increasing the GDP by 0.3 percentage points from the original estimate of 2.6%. We hope to see more government stimulus to revive the Thai economy."
Risk factors to monitor include the US-China trade war, which could intensify if the Republicans win the US presidential election later this year, noted the brokerage. If this happens, Thai exports could suffer, said Mr Chaiyaporn.
BLS predicts the Bank of Thailand may slash interest rates in the fourth quarter of 2024, while the Federal Reserve cuts rates three times for a combined 0.75 percentage points as US economic growth is slowing. More rate cuts are projected for next year, said the brokerage.
BLS lowered the investment weight of risky assets to 20% of its total portfolio from 60-80% at the beginning of 2024, while combined short and long-term debt instruments increased to 80%.
The brokerage recommended to reduce the weight of investments in the Vietnamese bourse from 13% to 9%, dipping from 12% to 6% for the US. BLS allocated only 2% to the SET, with a focus on tourism and healthcare stocks.