INVESTMENT
Cryptocurrencies, sometimes listed as a hedge against inflation, have become a popular choice among young traders this year, spurred by bitcoin, the price of which has hit several record highs since the fourth quarter last year.
While the real economy awaits a real recovery, or at least a single quarter of growth, the Thai stock market has already recorded a return to pre-Covid levels and expects major gains in the second half of the year, in line with increasing vaccinations and a tentatively scheduled return of international tourists.
Globally investors are growing more confident in the rate of vaccinations, heavily skewed towards wealthy nations, and pouring money into sectors set to gain from reopening economies and increased travel.
But despite this optimism, some investors are now concerned with a potential drop in liquidity in the system if the Federal Reserve decides to taper its quantitative easing programme and eventually increase interest rates to stave off rising inflation.
Analysts predict the Fed will scale down purchasing government bonds at the end of the year, and likely hold off raising interest rates until next year.
Although the market is concerned about an inflation hike at the end of the second quarter that may cause interest rates to rise faster, analysts expect inflation to be a shortterm factor as oil prices increase, with Opec production cuts scheduled to relax in the third quarter.
Thai listed companies recorded good performances in the first quarter this year, with 262 billion baht in profits, higher than analysts’ projection of 200 billion.
Asia Plus Securities (ASPS) estimates net profits of Thai listed firms this year will soar to 805 billion baht, a huge jump compared with 420 billion last year. ASPS also adjusted its Stock Exchange of Thailand (SET) Index target this year to 1,670 points.
BOOM OR BUST?
Although the outlook has improved for the stock market, new waves of Covid-19 are keeping many businesses closed, especially around Bangkok, with more than 170,000 cumulative infections reported in Thailand and over 1,200 deaths.
Airlines, hotels and tourism-related businesses continue to suffer the highest losses in profits, while energy, petrochemicals, frozen seafood exports, steel, electronics parts, e-commerce, telecom, banks and leasing are sectors that have begun to see good output.
The initial public offering (IPO) market has seen significant growth in the first half of the year with six companies listing on the SET, including two large ones — PTT Oil and Retail Business (OR) and Ngern Tid Lor (TIDLOR) — with a total of 98.62 billion baht raised and a total market cap of 329 billion baht.
The Market for Alternative Investment (MAI) saw eight IPOs in the first half of the year with total funds raised worth 2.76 billion baht, increasing the MAI’s market cap to 11.4 billion baht.
Helped by these high-value IPOs, Thailand is still the largest IPO market in Asean in terms of money raised, and more companies plan to list on the SET and MAI in the second half of the year.
Paiboon Nalinthrangkurn, chairman of Tisco Securities, said foreign investors remain net sellers of Thai shares worth over 50 billion baht in the first five months of the year. Foreigners have offloaded 900 billion baht worth of shares since 2011. Their contribution in the Thai bourse fell from 36.8% 10 years ago to 26.7% at present.
In addition, the weight of Thai stocks in the MSCI AC Asia ex Japan Index has suffered a consistent drop from 7-8% 20 years ago, to 2-3% 10 years ago and 1.8% today, causing most funds to reduce their investment in the Thai stock market.
According to data from the SET, the number of new investors increased by roughly 800,000 accounts in 2020 and 700,000 accounts for the first four months of 2021.
ASPS said in past years when the profit of listed companies grows by more than 30%, the SET Index has risen 20% in the same year.
REAL GOLD OR DIGITAL?
The price of metal commodities — gold, silver and iron — continue to soar amid global market inflation and a weakening US dollar.
Most gold gurus and researchers predict the global price will not surpass the US$2,040 milestone set last year. The price has climbed from a low in March of $1,684 to $1,913 at the end of May.
Domestic gold bullion prices also bottomed out in March at 24,500 baht per one baht of gold before climbing to about 28,200 baht at the end of May.
Cryptocurrencies, sometimes listed as a hedge against inflation, have become a popular choice among young traders this year, spurred by bitcoin, the price of which has hit several record highs since the fourth quarter last year. The growth and advertisement of digital assets on social media has played a big role in promoting crypto trading, although cryptocurrency prices remain highly volatile and could expose young traders to high risk.
The price of bitcoin surpassed 1 million baht or $40,000 at the beginning of January, and hit 2 million baht or more than $60,000 during Songkran in April. The price then tanked and is hovering around 1 million baht.
As of April 26, there were 697,780 digital asset trading accounts in the country, up from about 160,000 accounts at the end of 2020, according to data from The Securities and Exchange Commission (SEC).
In response to the proliferation of digital assets, the Finance Ministry and the SEC have tried to regulate the assets through various approaches, such as sending warnings to digital exchanges that failed to meet the SEC’s security standards or expose investors to fraud risks.
Among its many attempts to regulate the asset class, the SEC has proposed qualifications for cryptocurrency traders and amended the regulations regarding the offering of real estate-backed tokens.
According to the SEC, only one company has filed documents requesting approval to offer a digital token in the first half this year.
BACK TO BASICS
Funds raised from the issuance of corporate bonds are likely to return to a normal rate in the second half this year.
As of April 30, the issuance of corporate bonds totalled 282 billion baht [to be updated], a significant increase from 198 billion recorded during the same period last year.
The Thai Bond Market Association (ThaiBMA) projects total funds raised from corporate bonds will reach 700-750 billion baht this year, exceeding the 677 billion raised in 2020 when issuance faced pressure from an increase in the government bond yield curve and a decrease in back-end operational support as a result of the pandemic and remote work.
Ariya Tiranaprakit, ThaiBMA’s deputy managing director, said the excess liquidity in the market and the long-term government bond yield curve, which has been stable since the end of April, are supporting factors for corporate bonds.
The government 10-year bond yield currently stands at 1.77%. Analysts think the chance of interest rates increasing this year is also low.
Funds raised from corporate bonds this year are mostly for loan repayment, not for mergers and acquisitions as in years past, said Ms Ariya.
Meanwhile, the insurance industry should continue to be challenged by the outbreak.
As of May 15, the cumulative number of Covid-19 insurance policies since the product was launched in February 2020 was 22.9 million policies, with total premiums received worth 8.11 billion baht. This is an increase from 9.36 million policies and 4.14 billion baht at the end of 2020.
Total claims from Covid insurance surged to 665 million baht from 77.3 million at the end of 2020, in line with surges in daily new cases, according to data from the Office of the Insurance Commission.
The Thai General Insurance Association estimated claims from Covid insurance could surpass 3 billion baht if the number of new Covid patients grows at a daily rate of 2,500 cases.
The industry reported insurance companies can still absorb losses from Covid claims by adjusting product features, including the coverage and premiums, to meet current conditions.
However, how the pandemic will affect the overall insurance industry remains unclear, said the association.