Thursday, October 22, 2020

Investors advised against large-cap stocks as SET to be on a downhill slope

Sep 25. 2020
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By The Nation

Experts are advising investors to avoid large-cap stocks as Thailand’s stock crisis will be a prolonged one.

The Stock Exchange of Thailand (SET) Index on Thursday (September 24) closed at its lowest for the day at 1,241.52, down 22.49 per cent compared to its previous close.

The index has fallen over 15 per cent from its highest point at 1,454 points in June this year,

Dr Niwet Hemwachirawarakorn, a well-known high-value investor, said investors have realised that the current situation is not beneficial for the stock market, because the Covid-19 outbreak has not been resolved and the economic forecast is gloomy.

"Most investors, especially foreigners have given up on the current situation and sold their stocks. This crisis is similar to previous crises when stock indices fluctuated at the beginning and then fell sharply after investors realised that the crisis was worse than expected. Hence, it is difficult to see a V-shaped recovery, while share prices will fluctuate up to three times,” he said.

He added that it was tough to tell when the index will rise again because the current economic direction is difficult to predict, especially in relation to the Covid-19 outbreak, and the market is expected to remain under pressure until the crisis is over.

"Long-term investors should wait because the crisis is not over yet. The economy will truly recover once the Covid-19 crisis is resolved and people were allowed to travel around the world freely," he said.

He advised investors to buy shares that are still able to operate business for long-term investment instead of large-cap stocks that rely on economic recovery or are attractive to foreign and institutional investors.

Meanwhile, Nuttachart Mekmasin, assistant managing director at Trinity Securities, said the Bank of Thailand's move to cut the country’s gross domestic product forecast in 2021, especially in tourism and domestic consumption, will pressure the market in the short term.

He said there were only export stocks that performed better than other groups, adding that export is expected to contract 8 per cent this year from the previous forecast of a 10 per cent contraction, though it is expected to rise to 5 per cent next year from economic recovery and weakening baht.

"We advise investors to hold cash when the SET uptick rule expires because we expect the index to fall to 1,200 points. They should avoid buying large-cap stocks until the index falls below 1,200. Large-cap stocks expected to recover are energy, petrochemical, bank and property groups," he said.

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