Analysts look to positives amid N Korea tensions
TENSIONS over the stand-off between the US and North Korea could pressure global stock markets, say investment experts, though some note that concerns over the prospect of a French referendum on whether to leave the European Union may encourage capital to stay put in Thai and other emerging markets.
Warut Sivasariyonon, managing director for research at Asia Wealth Securities, said that the face-off between Washington and Pyongyang over North Korea’s nuclear programme was likely to persist as an issue that warranted monitoring by investors.
Despite North Korea’s failed missile launch last Sunday, global money markets are concerned over the escalating tensions and the risk of renewed conflict on the Korean peninsula, and investors may switch out of stocks into low-risk assets and that could affect the Thai bourse, he said.
Monthol Junchaya, chief investment officer at One Asset Management, said that the Stock Exchange of Thailand Index could be volatile over the coming weeks, pressured not only by the North Korean issue but the fallout from the US attacks strikes on Syria.
Topping concerns out of Europe is that two of the four leading candidates for France’s presidential election have vowed to hold a referendum on the country’s membership of the EU if they won. Polls indicate strong support for the two: the far-right’s Marine Le Pen and the far-left’s Jean Luc Melenchon.
This week, the SET Index is forecast to move in a range of 1,575 to 1,590 points, Warut said, warning investors to proceed with caution and an eye on external developments.
One Asset Management estimates the benchmark index will move in a range of 1,560-1,600 points.
Monthol said the US dollar would likely depreciate in the short term, encouraging foreign capital to flow into emerging markets - particularly Thailand, Indonesia and the Philippines.
Short-term investors should be cautious on risky assets, given the market volatility, while those with a medium-to long-term view could accumulate stocks when the SET Index falls below 1,530 points, Monthol said, guided by positive domestic factors.
In regard to investment strategy amid the geopolitical concerns, there would be two possible outcomes, he said. If the US launches an assault on North Korea, a war will break out immediately and stocks will suffer. However, the US, mindful of Pyongyang’s nuclear capability, may opt for sanctions amid other punitive financial responses against the regime, before further consideration of a military response. Monthol said the latter scenario was the most likely.
Significantly, China has indicated a greater willingness to collaborate with the US on efforts to contain North Korea, he said. Thus the prospect of conflict over the short to medium term should begin easing.
Warut likewise believes the risk of a war is low. However, he favours defensive stocks, particularly those with sound fundamentals and high dividend yields.
Monthol recommends a greater weighting on safe-haven assets, reflecting the international political tensions. Last week, the spot gold price rose 2.7 per cent.
Yesterday, the SET Index dropped 1.49 points to 1,574.42 on turnover of Bt31.97 billion. Japan’s Nikkei 225 Index and South Korea’s Kospi Index rose by 0.11 per cent and 0.51 per cent, respectively.
