Asia Plus Securities assesses that global investment sentiment is under heavy pressure from ongoing warfare and tight monetary policy. The war between the United States and Iran has now dragged on for 19 days, with attacks targeting energy infrastructure.
Most recently, Israel struck Iran’s gas and oil storage facilities in the South Pars and Asaluyeh fields, which are among the world’s largest natural gas reserves. In response, Iran has threatened to attack energy sources in Qatar, Saudi Arabia, and the UAE. These tensions have driven Brent crude oil prices to as high as $107.38 per barrel.
Meanwhile, the U.S. Federal Reserve (Fed) has sent a hawkish signal, adding risks for the economy to fall into stagflation. The surge in oil prices has raised concerns over inflation prospects. In its most recent meeting on Wednesday, the Fed decided to hold the interest rate at 3.75% as expected, but stressed that rates will not be lowered until inflation slows.
Additionally, the Fed has raised its forecast for Personal Consumption Expenditure (PCE) inflation for the year 2026 to 2.7% (up from 2.4%), while the Dot Plot report indicates the central bank may cut rates only once more this year.
The Fed’s hawkish stance has prompted investor concerns about an economic slowdown, reflected in the rising direction of U.S. government bond yields, especially in the short term, which have risen faster than long-term yields, resulting in a ‘Bear Flattening’ pattern. This is similar to the period during the Russia–Ukraine war in 2023, which eventually led to an inverted yield curve. These factors have increased the risks of the global economy entering stagflation and heightened volatility in the stock market.
Domestically, March 19 marks an important day with a parliamentary vote to choose the Prime Minister. Clarity on the government formation is becoming clearer, led by the Bhumjaithai Party in coalition with the Pheu Thai Party and other partners for a total of 292 votes. The brokerage notes that Mr. Anutin Charnvirakul is expected to be nominated as Prime Minister. Should all processes go smoothly, Thailand will have a new government in place by May 2026, around one to one and a half months sooner than scheduled.
However, Asia Plus cautions investors to be wary of potential political risks, given the Constitutional Court’s decision to accept a petition to consider whether ballots with barcodes or QR codes violate the principles of secret voting. The brokerage has outlined three possible scenarios:
- Positive outcome (60%): Not unconstitutional, the election is valid, and the government moves forward (best for the stock market)
- Correction but not annulment (20%): Orders the Election Commission to amend regulations, but does not affect past election results
- Worst case (20%): The Court rules that the issue affects voting rights, thus invalidating the election and requiring a new vote, which would delay the entire political structure and economic stimulus policies
Investment strategy: Favor ‘inflation hedge’ stocks to combat volatility. Amid market swings from inflationary and rising bond yield pressures, Asia Plus advises investors to focus on stocks with expanding ‘inflation-protection’ attributes. Top picks are PTTEP, BANPU, IVL, STA, KTB, BBL, CPAXT, BDMS, KCE, and TU.
These can be grouped as follows:
- Commodities (benefiting from oil prices): PTTEP, PTT, TOP, PTTGC, IVL, BANPU, STA, NER
- Banks and insurance (benefiting from rising bond yields): KTB, KBANK, SCB, BBL, BLA
- Necessities: CPAXT, BH, BDMS
- Exporters (gaining from a weaker baht): DELTA, KCE, HANA, TU
At the same time, the brokerage recommended traders ‘Avoid’ stocks that are adversely affected by high interest rates and inflation, such as luxury goods/construction retail (COM7, SPVI, HMPRO, DOHOME, GLOBAL) and hire purchase/lending businesses (MTC, TIDLOR, SAWAD).
