Pi Securities (PI) reports that inflationary pressures are beginning to ease, largely due to falling crude oil prices following positive signals from the U.S.-Iran negotiations.
The upcoming month will be critical, as the potential reopening of the Strait of Hormuz could further pressure oil prices and boost asset classes like equities, gold, and bonds. Nonetheless, PI urges close monitoring of U.S. inflation figures, especially the producer price index, which is showing signs of acceleration that could increase consumer prices.
In the U.S., the S&P 500 has climbed more than 18% from its recent lows, buoyed by strong earnings and optimism over trade talks with China and Iran peace effort. However, this rally has pushed the equity risk premium into negative territory, a potential mismatch with actual risk, and heightened volatility is expected as U.S. bond yields climb.
Should U.S. consumer inflation surpass 3.7%, pressures on policy rates could mount once more, with the CME FedWatch Tool suggesting a 41% chance of a rate hike by January 2027. A sharp drop in oil prices, however, could ease these concerns.
If oil instead fuels rising inflation—echoing the situation in 2022—bond yields may climb further, weighing on the S&P 500 and particularly impacting tech and high-valuation stocks. In such periods, value sectors like staples, healthcare, utilities, and telecoms—major components of the SET Index—tend to better weather volatility and outperform.
Thai listed firms’ 1Q26 earnings outperformed expectations in several sectors, notably electronics, ICT, and retail. According to Bloomberg, 39% of the SET100 beat sales forecasts, while 59% surpassed profit expectations, boosting the index’s total net profit to THB 325 billion, a 27% increase year-on-year. Highlights included SCC, which boosted EBITDA 36% YoY; DELTA, which saw a 44% revenue surge; and robust growth from SAWAD, MTC, and TIDLOR among non-bank lenders.
Retailers like CPALL, CRC, and GLOBAL posted strong profits, while CPF profits fell sharply due to lower meat prices. The hospital sector reported mixed results, with BDMS profits down amid falling patient numbers and BH eking out modest growth.
On the back of these results, Bloomberg Consensus lifted its 2026 Thai market EPS forecast from THB 95 to THB 98.8. Still, the prospect of persistent high oil prices could challenge market momentum in the coming quarter, even if energy stocks remain positive. A decline in oil, by contrast, would likely lower bond yields and benefit financials, real estate, retail, and electronics.
For investors, PI recommends AI-linked equities like DELTA and HANA for those with a higher risk appetite. Conservative investors should focus on attractively valued stocks sensitive to lower rates, such as TIDLOR, MTC, and CPALL. However, PI also stresses the importance of caution: with market valuations tightening, holding cash reserves is a prudent strategy in the face of potential correction risks.
