Global stocks in the past two weeks have moved in response to the US election and its outcome, particularly the so-called 'Trump Trade', or stocks linked to the policies of the incoming Republican president.
While investors speculated on energy counters in the US market, upstream energy companies in Thailand were down, even though Donald Trump's energy policy will likely tilt more towards fossil fuels. This will bolster US energy production while pulling down energy prices to reduce costs for industries and consumers. However, adverse effects on non-US oil and gas players will outpace the rise in volumes, while US operators are expected to benefit from both higher volumes and eased regulations.
Selling pressure prevailed on the Stock Exchange of Thailand early last week before buying interest in leading blue chips like Delta Electronics kicked in and supported overall momentum. With its material influence on the market, gains in DELTA managed to offset losses in other sectors such as energy.
This week, the SET Index should continue to move with blue chips in the 1,450-1,500 range. Factors related to individual stocks will probably outweigh those influencing overall market sentiment, as several companies will provide management guidance for the fourth quarter and the 2025 outlook following their results announcements.
This is the time of year when medium- to long-term investors as well as institutional investors assess portfolio adjustments for the coming year, usually in late November and early December before entering the long holidays. Therefore, we believe individual plays will be more influential than developments affecting the broader benchmark index. Attractive plays would include:
- Firms whose 2025 business plans set targets for continuous growth, after achieving this year's targets;
- Signals of an earnings turnaround, such as China-linked plays resulting from Chinese stimulus, and
- New S-curve businesses that will invest more amid fragile economic conditions, in areas such as data centres and artificial intelligence.
Among positive factors expected to influence trade, US Federal Reserve interest rate cuts have been within expectations and the market seems to have priced in another cut at the final policy meeting of this year. Therefore, bond yields that spiked on US election speculation could turn lower as investors take profits. We expect bond yields to be on the downtrend in any case.
Locally, the Monetary Policy Committee will hold its final meeting of the year on Dec 18, after surprising the market with an interest rate cut last month. However, Bank of Thailand Governor Sethaput Suthiwartnarueput has already signalled that future rate cuts would be gradual as the central bank needs to preserve ammunition to propel the economy in case of need.
In a related development, the market is awaiting official confirmation on the identity of the next Bank of Thailand board chairman, after weeks of speculation that the government has been pushing its candidate for the job. The Ministry of Finance, meanwhile, has proposed to trim contributions to the Financial Institutions Development Fund (FIDF) from 0.46% at present to compensate for debt reduction measures and reinforce the central bank's policy rate cut. However, the BoT governor has already indicated he disagrees with this idea.
On the external front, the market will continue to monitor the Chinese government's economic stimulus efforts. "China's government is capable of driving sustainable economic development," Premier Li Qiang declared recently, adding that Beijing could still apply additional fiscal and monetary tools to achieve the long-term economic growth target at 5%.
However, the recent meeting of top policymakers did not yield much policy clarity and triggered selling pressure. We anticipate clearer details next month when sub-committees are set to meet and flesh out the ideas discussed earlier.
Among negative factors, the prospect of a US and global economic slowdown remains a key risk to monitor. Recent US economic indicators may appear to be better than expected but the overall trend could remain to the downside. Thus, the recently inflated market could periodically face selling pressure.
Now that the US election is out of the way, we will be seeing renewed attention paid to major conflicts that have resisted easy solutions. Analysts believe discussions between the Trump administration and the parties to the Russia-Ukraine war could be easier than those with Israel.