El Niño likely to impact Thai stocks, experts warn
The probability of the El Niño weather phenomenon occurring in the second half of this year and continuing into early 2024 will have a major impact on agriculture
El Niño drought-related effects likely to have the biggest effects on the sugarcane-growing region of Asia, resulting in decreased sugar production, according to Bualuang Securities.
Adequate rainfall in recent years has led to lower sugar prices that have pushed the global market price of sugar to its highest point in the past 10 years at 27 cents per pound.
However, as DBS Vickers Securities (Thailand) points out, when rainfall is below normal, agricultural production is reduced. While this leads to increased selling prices and benefits farmers in the short term, a massive fall in agricultural production causes considerable damage and severely affects exports.
Stocks that benefit from severe drought and hot weather include fan / air conditioner manufacturers and fruit juice and beverage producers such as OSP, Sappe, Tipco, Malee, ICHI, and TACC. These companies are likely to experience increased sales.
On the other hand, stocks that suffer from low rainfall, or insufficient water supply include water utility companies like EASTW, TTW, and WHAUP.
The Meteorological Department estimates that the El Niño phenomenon is likely to occur from June, resulting in an average increase in temperatures, reduced rainfall, and several provinces facing drought conditions. Consequently, the water supply for consumption and agricultural purposes will be affected, causing damage to agricultural crops.
