SET performance depends on govt stimulus policies: market experts
The performance of the Thai stock market for the rest of the year will hinge on the effectiveness of the new government’s economic stimuli and whether these policies can stir up investors’ sentiments that have been hit adversely by the US-China trade war, market experts predict.
Investors hope the government will have effective measures to stimulate the economy after exports, public investment, tourism and consumer spending have been disappointing in the first half of this year,” said Peerapong Jirasevijinda, chief executive officer of BBL Asset Management.
A survey conducted by the Federation of Thai Capital Market Organisation (FETCO) revealed that investors’ sentiment for the next three months remains positive.
However, the trade war escalated further last week after US President Donald Trump announced on August 1 that he will raise tariffs by 10 per cent on US$300 billion (Bt9.22 trillion) worth of Chinese goods. The yuan also depreciated by 7 per cent on Monday in response to the US denouncing China for allegedly manipulating the currency earlier in the day.
“The recent escalation of the trade war has worsened investors’ sentiment, leading to net outflows witnessed in the Stock Exchange of Thailand [SET],” said Paiboon Nalinthrangkurn, chairman of FETCO.
In July, the SET saw a net inflow of $652 million, but from August 1 to 5 it saw a net outflow of $260 million, reflecting the change in investors’ sentiment after the recent trade war-related events, Paiboon said.
Even so, Paiboon expects the dampening of investors’ sentiments to be temporary as markets will become more bullish as Trump looks to conclude or at least reach a temporary settlement in the US-China trade conflict to boost his popularity, as US presidential elections approach.
He also said that the US Federal Reserve is now more likely to reduce its interest rate as Trump is threatening to implement further tariffs on China, which will likely draw a retaliatory action. The European Central Bank and the Central Bank of Japan are also likely to lower their interest rates, he said.
He added that the worsening trade war has also led to an increased liquidity in the global stock market and boosted the inflow in the Thai bond market, as investors see it as a safe haven.
In July, the Thai bond market saw a net outflow of $811 million, but from August 1 to 5, it saw a net inflow of $186 million, according to FETCO.
Given the high liquidity in the global stock market, Paiboon said that it is up to the government to stimulate the economy effectively in the next five months and improve sentiments so more investment can be drawn into the Thai stock market.
In order to do this, the government will have to target consumer spending in the grassroots economy and continue investments in mega projects such as the Eastern Economic Corridor, Peerapong said.
