SET outperforms post-Brexit but unlikely to cross 1,500: analyst
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THE STOCK Exchange of Thailand is likely to move sideways-up as it outperforms other emerging markets, but the impacts from last week’s “Brexit” vote will mean it has a hard time breaking the 1,500-points level by the end of this year.
“The SET Index should be in the range of 1,400-1,500 points,” Paiboon Nalinthrangkurn, president of the Investment Analysis Association, said yesterday.
The SET closed up 0.79 per cent to 1,424.31 points yesterday.
Citizens of the United Kingdom last week voted to leave the European Union. Markets in the UK and EU felt the heaviest impacts. The effects on SET, as one of the outperforming emerging markets, were not large.
Paiboon said the UK would face political risk and its economy would slow down after the “Brexit” vote, but it would not yet enter a recession. Foreign direct investment and the stock markets of the UK and EU would also be strongly affected. However, the impact of Brexit would not spread, as the UK economy accounted for only 2 per cent of global gross domestic product, even though it ranks as the world’s fifth-largest economy.
“Brexit is likely to be a problem for the UK and EU themselves, not for the world, unless this leads to a global financial crisis,” he said.
The UK’s actual departure from the EU is expected to need two years to take effect, causing “high uncertainty” in financial and capital market sentiments.
During the uncertainty, there will be an opportunity for emerging markets, including Thailand, to welcome capital inflows that might be escaping from the bond markets with very thin yields, Paiboon said. The US is expected to put off an increase in its federal funds rate to the end of this year, he said.
The EU will likely renew its quantitative-easing (QE) policy and Japan is likely to do more QE.
Porranee Thongyen, senior executive vice president of Asia Plus Securities, said Brexit had greatly affected the currencies of the UK and EU, with both sterling and the euro weakening against the US dollar in the medium to long term. Investment in Thai stocks should be selective buys.
“Be careful of some stocks related to exports, food, tourism and industries that have production bases in the EU. “Brexit has not been completely priced in the capital market,” she said.
