SET expected to waver this month despite July rise

The Stock Exchange of Thailand (SET) index is expected to move narrowly sideways this month because of increased stock valuation, with the persisting global trade row poised to cause sporadic stock market fluctuations, analysts say.

Thai stocks rose in July, propelled by the banking sector’s better-than-expected earnings and supported by active fund managers overweighting local stocks because market prices were lower than fair value, said Nattachat Mekmasin, senior vice-president of Trinity Securities.

Fund inflows moving into long-term equity funds and retirement mutual funds increased, with local asset management firms launching new trigger funds, defined as equity funds with targeted returns. These factors boosted the bourse to 1,700 points last month, Mr Nattachat said.

Despite the banking sector’s positive second quarter performance, analysts have yet to raise their profit expectations, therefore investors have to continue monitoring the earnings of other sectors listed on the SET as well, he said.

Apart from domestic fund inflows boosting upside gains on the stock market, foreign investors invested in a long position in July through purchase of futures contracts on the Thailand Futures Exchange at around 40,000 contracts, signalling that foreign fund flows will return, Mr Nattachat said.

The SET index in August is forecast to move within a range of 1,650-1,750 points where further upside gains are dented by the global trade row, rising US Treasury yields as well as Italy’s public debt mountain that could result in a possible downgrade in the country’s credit rating, he said.

Poranee Thongyen, executive vicepresident at Asia Plus Securities, said the global trade war could slow down demand for commodities and suppress Dubai crude oil prices to fall under US$70 per barrel.

The Sino-US trade war has caused fluctuations for almost every commodity.

Since the US declared an import tariff hike on Chinese goods worth $34 billion (1.13 trillion baht) on July 6, commodity prices have plunged drastically, though prices have recently recovered as tensions have eased temporarily, Mrs Poranee said.

Chaiyaporn Nompitakcharoen, deputy managing director of Bualuang Securities, said the firm has a neutral view on Thai stocks in August, with the outlook weighing between “domestic push” and “external drag”.

Factors supporting a domestic push are Thailand’s economic recovery, resumed tenders for infrastructure investment projects and expectations of a pre-election stock market rally. On the other hand, threats of an escalating trade war and a more hawkish monetary policy stance by the US central bank are deemed external drags, Mr Chaiyaporn said.

Fund outflows from Thailand’s stocks for the first seven months logged at 190 billion baht, of which 180 billion baht were outflows during the first six months, according to Aira Securities.

But fund outflows in July declined to only 10 billion baht from about 30 billion baht per month during preceding months, therefore it’s expected that foreign investors will stop or slow Thai stock sales, Aira Securities said. Dividend payments for the first half and Thailand’s continuous economic recovery are positive factors for the SET this month, it said.