Krungsri Securities (KSS) expects the Thai stock market to trend higher, supported by signals of a potential U.S. Federal Reserve rate cut following signs of stress in the American credit market.
The warning came after U.S. auto-parts giant First Brands filed for bankruptcy, an isolated issue but one that highlights vulnerabilities in financial markets. This backdrop reinforces expectations for easier monetary policy globally and lends support to emerging markets.
In a recent note, KSS identifies strong fund inflows into China and South Korea over the past week, pointing to a rotation within emerging markets. The analyst maintains a ‘Sideways/Up’ outlook for the SET Index, predicting resistance at 1,300/1,312 and support at 1,285/1,280. Domestically, an anticipated 25 basis-point rate cut is expected to gradually help the SET rise above the 1,300 mark.
Key global developments are shaping the outlook:
- U.S. Economic Slowdown:
September’s ISM Services PMI dropped to 50, its lowest reading in over a year, with new orders weakening and employment contracting for a fourth month. The data underscores a late-cycle U.S. economy and supports the case for the Fed to cut rates twice more in 2025.
- Rising U.S. Government Shutdown Risk:
Markets are also pricing in heightened risk of a prolonged U.S. government shutdown, possibly lasting up to 21 days. Bond yields are retreating and the Dollar Index has slipped below 98, encouraging capital to flow back into emerging markets.
KSS highlights that, over September, Asia’s EM inflows accelerated, particularly into South Korea and China. There is also a shift from growth-led markets into value, commodities, and Chinese and South Korean tech.
- OPEC+ and Thai Fuel Price Cuts:
OPEC+ announced a modest 137,000-barrels-per-day production increase, broadly in line with expectations, while the Thai government has reduced domestic fuel prices by THB 0.5 per litre as fiscal imbalances in the oil fund ease. The move is expected to boost local consumption and support retail and energy stocks (OR, PTTGC, TOP).
- China Refines Economic Strategy:
Beijing has advanced ‘anti-involution’ policies, aiming for value creation, pollution control, and supply restrictions. KSS suggests this trend will benefit Asian and Thai stocks tied to high-value industries and clean production, listing PTTGC, TOP, IVL, and PTT as beneficiaries.
- Cracks in the U.S. Credit Market:
The bankruptcy of First Brands, with $5.8 billion in leveraged loans, raises concerns about fragility within the credit system, further strengthening the case for Fed easing.
- Ongoing Domestic Tailwinds:
Thailand is also buoyed by surging Chinese arrivals during Golden Week, with daily visitors doubling the norm to 22,000–23,000. Inflation in September is expected at -0.6% year-on-year, close to its recent low, potentially paving the way for a rate cut when the Bank of Thailand meets on October 8.
Additional government stimulus is anticipated, with the cabinet scheduled to unveil new economic measures imminently.
KSS’s tactical strategy focuses on deep value domestic plays, interest rate-sensitive names, and upstream energy. With continued supportive fund flows and favorable policy tailwinds, upside potential remains for short-term portfolios.
Top stock picks from KSS include Muangthai Capital (SET: MTC), CP All (SET: CPALL), and CP Axtra (SET: CPAXT). The firm recommends prioritizing sectors poised to benefit from falling interest rates and rising domestic consumption.
