After dropping 4.8% in January, the Stock Exchange of Thailand (SET) index continued its decline in February, shedding another 8.4%. The trend remained this month, with the market now around 1,170 points, not far above its low for the year.
This puts the SET at levels last seen during the pandemic, even though there is no such crisis this year.
January started with lots of bad news, but in February there was not any major negative events that would impact the SET. However, concerns over maturing long-term equity fund positions, estimated at 180 billion baht as of early February, kept market sentiment negative.
Moreover, lacklustre results for market giant Delta Electronics resulted in panic selling, pushing the stock down more than 40% in February and dragging the SET down by more than 50 points. In addition, Airports of Thailand (AOT) received news that payment from King Power would be delayed, raising market fears of a prolonged payment period or another round of discounts for the duty-free operator.
Shares of AOT have plunged by almost 30% since the news about trouble with King Power emerged, heightening market uncertainty and pushing the SET down 8.4% in February to 1,203.72 points.
The average daily turnover was 51.4 billion baht in February, shooting up 34.4% from the month before.
TARIFF TURMOIL
The intensifying trade war has become a significant threat to the Thai stock market. US President Donald Trump slapped 25% tariffs on most goods from Canada and Mexico, then cancelled some of them, but kept making new threats that began to confuse markets worldwide. Many imports from China also face additional tariffs of 10-20%, creating a ripple of trade concerns worldwide, including in Thailand.
Moreover, Trump announced reciprocal tariffs will be imposed on every country that has higher tax rates on US goods than those charged in the US. This puts Thailand in the crosshairs as it has some of the highest tariffs on US goods for many items.
Meanwhile, the Bank of Thailand surprised the market by cutting its benchmark interest rate by 25 basis points to 2.0% in February, much earlier than expected, reflecting Thailand's lacklustre economic outlook. Yet the rate cut did not rev up the stock market.
Adding to the pain, the fourth-quarter results for listed Thai companies was disappointing, depressing the earnings outlook. Some 47% of companies announced profits below market expectations; only 30% beat expectations while 23% were in line. The large number of misses raised the prospect of further downward earnings per share revisions by market analysts.
With good news lacking, the market continued to decline throughout February and remained in a tailspin thus far in March.
STOCK PICKS
Our investment theme is stocks with good fundamentals and those that could be targeted for inclusion in the new Thai ESGX funds. Our picks for this month include the industrial estate operator Amata Corp (AMATA), Bangkok Hospital chain operator Bangkok Dusit Medical Services (BDMS), Krungthai Bank (KTB) and the globe-spanning hotel and restaurant operator Minor International (MINT).
- AMATA is our top pick among industrial estate plays. The company's 2024 earnings were as good as expected, jumping 41% year-on-year to 3.4 billion baht, with realised sales totalling 3,000 rai of land valued at 15 billion baht. The company also boasts a hefty backlog of 21 billion baht as of the end of 2024. It has plans for capital expenditure of 6-7 billion baht, mostly in Thailand for the Chon Buri 2 project, and expects to improve its projects in Laos. AMATA recently announced a dividend of 0.50 baht a share, translating to a yield of around 4%.
- In the healthcare sector, BDMS continues to be our top pick, posting fourth-quarter net profit of 4.3 billion baht, increasing 10% year-on-year and 2% quarter-on-quarter. Revenue picked up 4% on the year, but fell 2% from the previous quarter to 28 billion baht. Revenue growth was mainly from foreign patients (up 8% year-on-year), which contributed 28% of the total. Although first-quarter 2025 profit could fall from Q4 of 2024 due to seasonal effects, we believe it will grow year-on-year as patient numbers are rising this year. BDMS also announced a dividend of 0.40 baht a share for a yield of around 3%.
- KTB remains one of our top picks in banking, outperforming the sector that has been the biggest outperformer versus the SET this year. KTB's fourth-quarter net profit totalled more than 1 billion baht and its credit cost has been improving. Though its net interest margin has narrowed due to increased lending to the public sector (up 25% quarter-on-quarter to 525 billion baht), non-performing loans have been declining as government loans are more secure. KTB also announced a dividend of 1.545 baht a share for a yield of almost 6% per year.
- In the tourism sector, MINT is our top pick. We see the company benefiting from improving economic conditions in Europe, where most of its revenue comes from. The company expects revenue to increase 6-8% per year with robust profit growth of 15-20%. MINT also aims to be more asset-light in its hotel segment, while continuing to improve productivity and margins over the long term. Expansion is ongoing, with plans to increase its franchise network and the number of restaurant outlets in Cambodia, Laos, Myanmar and Vietnam, as well as Indonesia and India. Finally, MINT announced a tidy dividend of 0.35 baht a share.