The Stock Exchange of Thailand (SET) Index experienced a sharp contraction over the past five trading sessions, falling 5% from 1,586.61 to 1,507.20 points. According to InnovestX Securities (INVX), the market came under dual pressure from domestic policy risks and international technology sell-offs.
Domestic factors centered on heavy selling in petrochemical and refinery equities following government energy price restructuring, which sparked investor anxiety over policy predictability and long-term profit margins. Abroad, electronics shares tracked a global drop in tech stocks driven by debates surrounding the return on investment for artificial intelligence.
The recent correction pushed the SET’s forward PER down to 14x, positioning valuation at -1SD of its 10-year average of 16x. InnovestX highlights the ongoing U.S. midterm elections on November 3 as a pivotal factor shaping global risk assets, capital flows, and Middle East geopolitical dynamics.
Historical data from Bloomberg indicates that the S&P 500 tends to react favorably following U.S. midterm elections, posting average returns of 0.1% on the first day, 1.4% over one month, and 5.2% over three months.
InnovestX emphasizes that a divided government outcome historically yields stronger market responses, with the S&P 500 averaging a +6.3% return over three months. Political gridlock restricts substantial policy changes, such as aggressive tax overhauls or massive fiscal spending, offering policy predictability while easing concerns over fiscal deficits and excess bond supply.
InnovestX outlines two transmission channels to the Thai equity market:
1) Macro & Yield Dynamics : Gridlock tempers fiscal expansion fears, slowing the rise of the U.S. bond yields and the Dollar Index. A weaker dollar unlocks capital flows back toward emerging markets, including Thailand.
2. Geopolitical Sentiment: A split Congress increases the political hurdles for the executive’s military escalation in the Middle East due to budget approvals and statutory oversight (War Powers Resolution). However, foreign policy powers largely remain with the executive, making this a short-term sentiment driver rather than a structural guarantee against conflict expansion.
Conversely, a unified government would restore aggressive fiscal spending capabilities, driving up bond yields and strengthening the US Dollar, which would create headwinds for fund flows into emerging markets.
InnovestX stated that the 1,470 – 1,500 point zone is an attractive entry level for gradual accumulation. Historical trends show that testing the 14x forward PER level (-1SD of the 10-year average) typically forms a solid support base, providing a high statistical margin of safety.
Fundamental projections from InnovestX estimate SET EPS at THB 106 for 2026. Applying the 10-year average PER of 16x yields a SET Index target of 1,696 points. Looking ahead to 2027, an estimated SET EPS of THB 107 implies a target of 1,715 points. Given limited downside risk and substantial upside potential, InnovestX advises investors to accumulate quality stocks during this correction.
InnovestX recommends a “Selective Buy” strategy focused on four key investment themes:
1) FDI & Tech-Infra Play: Capitalizing on accelerating domestic investment cycles, clean energy restructuring, and expected Cabinet guidelines on data center operations. Top picks include BBL, KBANK, KTB, WHA, AMATA, DELTA, HANA, KCE, GULF, GPSC, GUNKUL.
2) Strong Earnings & Laggard Play: Defensive positioning targeting strong YoY earnings growth for 2H26–2027 alongside laggard share prices and robust financial health. Top picks include AOT, AP, BCH, BDMS, CPN, TRUE, TU.
3) Quality Dividend Play: Enhancing portfolio resilience against volatility and capturing inflows from tax-saving funds (TESG, RMF, SSF) and domestic institutional buying in November – December. Focuses on high-yield stocks (>5% dividend yield) with strong cash flows. Top picks include BBL, KTB, KKP, HMPRO, AP, SCCC, PTT, FTREIT, LHSC.
4) Geopolitical & Yield Relief Play: Tactical short-term plays for high-risk tolerance in the event of a divided government in the U.S., benefiting from lower energy costs, rebounding Middle East economic activity, and declining bond yields. Top picks include AAV, THAI, GPSC, BGRIM, BH, BDMS, AOT, MINT, ERW, MTC, SAWAD, TIDLOR.
