JP Morgan Expects Thai EPS Growth to Outperform MSCI AxJ, Eyeing Consumer and Energy Stocks

J.P. Morgan stated that positive earnings surprises and THB recovery had fueled a recent rally in Thai equities with SET/MSCI Thailand rising by 7% MoM in USD terms, outperforming MSCI Asia ex Japan which is flat MoM while MSCI Emerging Market is +1% MoM. The bulk of this performance was driven by IT, financials and energy sectors which delivered strong earnings.


Meanwhile, tourist arrivals have spurred domestic activities and created knock-on impacts on consumer sentiment as the country recorded 3.78 million inbound travellers from Jan.-Aug. 17, which generated revenues of 176 billion baht.

However, JP Morgan noted that the tourism recovery may decelerate in the upcoming months during the low season, but if the kingdom could sustain a modest growth of 5-10%, tourist arrivals should reach around 9-10 million this year, which is about 25% of Thailand’s pre-Covid level.

JP Morgan stated that it believes the stocks are already reflecting an accelerated tourism recovery.


The global economics team of JP Morgan has lowered the US and EU growth outlook in the second half of 2022 and increased the forecast for the Fed Funds rate to 3.5-3.75% by the end of 2022.

Despite strong labour data and slower-than-expected inflation from the U.S. in July that reduced fears of an inflation-driven recession, it could open up the likelihood that the Fed may assertively curb inflation.


Lastly, the firm pointed that its own global manufacturing PMI slipped to 51.1, a 25-month low and a confirmation that global growth momentum is slowing. Furthermore, historical analysis showed that average Thai equities’ returns are negative when the global manufacturing PMI is above 50 but decelerating.

The combination of PMI above 50 and decelerating has historically created the following winners for JP Morgan. JP Morgan stated that it preferred consumer and energy sectors for the investment in Thai equity as it chose HMPRO, KBANK, PTTEP, BANPU and CPALL for top picks, while industrials, financials and materials are among the largest laggards.


In addition, consensus currently estimates Thailand EPS growth of 21.9% and 11.3% in FY22-23 versus 8.7% and 9.1% for MSCI Asia ex Japan.