Bualuang Securities (BLS) wrote that the easing of tensions in the Middle East is ongoing, although short-term market volatility persists. The brokerage maintains its bull-case SET Index target in the range of 1,550-1,620 points. Buying interest has been observed rotating back into laggards and high-dividend stocks.
Sector rotation is expected to continue, with capital flowing from stocks that have seen significant gains previously into small power producer groups, which are likely to benefit from easing energy costs. High-dividend sectors such as the banking and insurance industries are also gaining attention, though upside potential remains limited.
Inflationary pressures have started to filter through to the real economy. Despite a recent pullback from peak levels, new energy costs, especially for diesel, remain significantly above historical averages. Bualuang estimates diesel prices will range from THB 35 to 40 per liter in the third quarter of 2026, over 15% higher than the previous cap of THB 29.94 per liter. This sustained increase continues to elevate production, transportation, and living costs, with higher expenses now reflected in a broader array of goods and services.
The prevailing theme for the Thai economy in the second half of the year is expected to be “higher inflation, slower growth.” Bualuang anticipates the Thai economy will bottom out in the third quarter of 2026, before gradually recovering in the fourth quarter and into 2027, supported by a rebound in tourism and private sector investment.
The recommended strategy emphasizes accumulating high-dividend banking stocks and wealth management businesses, while taking a speculative position in the power generation sector. Banks and insurance companies remain the most attractive picks in an environment of elevated inflation and slower growth.
For wealth management, the business continues to provide a boost to banks’ fee income in the second half of the year, with assets under management in bank fund businesses (under BLS coverage) rising 3.6% quarter-to-date and 12.6% year-on-year during April-May. Fee income accounts for around 15-25% of total income for the banking group, supporting banks such as KTB (expected dividend 6.1%), KBANK (5.8%), SCB (7.4%), and TLI (5.3%).
Meanwhile, easing concerns over energy costs and robust electricity demand growth are key supports for the power generation group. The expansion of data centers and AI infrastructure, progress on the new Power Development Plan (PDP), and the Direct Power Purchase Agreement (Direct PPA) project are all anticipated to drive electricity consumption higher, benefiting companies such as GPSC, BGRIM, and GULF.
