Investors wary as US, China rattle sabres

General election likely to determine trend

The brewing trade war is a key negative factor denting investment incentives worldwide, but analysts expect the US and China to negotiate and seek a solution before the tit-for-tat strategy induces a global economic slowdown.

Kiattisak Jenwipakul, managing director at SCB Securities (SCBS), said analysts expect the issue will simmer down as no side benefits from tariff retribution and the two largest economies are expected to negotiate.

But market participants are adopting a wait-and-see stance on the situation, resulting in investment delays until a clearer development materialises, said Mr Kiattisak.

SCBS remains positive on its investment outlook for the Stock Exchange of Thailand (SET) and has maintained its SET index target of 1,900 points this year. Factors supporting Thailand’s economic growth outlook are progress of public infrastructure investment projects and the Eastern Economic Corridor investment projects.

Though the banking sector is likely to be affected by a decline in fee income after several commercial banks waived online fee transactions, SCBS kept SET-listed firms’ net profit growth at 10% this year as online fee income is a minor revenue for banks, he said.

Poranee Thongyen, executive vicepresident at Asia Plus Securities (ASP), said overall market sentiment remains subdued as several negative factors have dented investor confidence, namely the brewing trade war, a decline in banks’ online fee income, and uncertainty surrounding Thailand’s general election.

The Thai bourse is expected to move within a narrow range of 1,700-1,800 points this year and the peak period has already passed as the index hit 1,852 points in February, said Mrs Poranee.

ASP has cut its SET earnings growth from 14% to 7-8% this year as it is expected the global economic growth momentum will take a downturn, causing a dip in corporate net profit as a result.

Net profit projection of SET-listed firms is reduced from 1.1 trillion baht to 1.09 trillion this year, she said.

“In the worst-case scenario, a trade war could cause a global economic slowdown and China could use its monetary policy against US trade barriers through yuan depreciation, which would lead Asian currencies to weaken as well,” said Mrs Poranee.

Since 2016, the yuan has appreciated by 14% against the greenback as a result of US protectionist trade policies, with the ringgit and the baht strengthening by around 15% and 10%, respectively, she said.

Thailand’s general election will be the factor determining future investment trends in the bourse, said Mayuree Chowikran, deputy managing director at Yuanta Securities. Foreign fund inflows could subside if the election continues to be delayed, she said.