Investors are hopeful to see a bull market in 2024, but that may not apply to the Thai stock market as CLSA Securities (Thailand) recently published a dire outlook for the Thai economy and market in 2024 with a sharp cut to index target.
CLSA wrote in its research paper, stating that Thailand will likely continue to face headwinds in 2024 as high household debt limits domestic consumption. The economic growth this year is expected to grow moderately at 3.8%, following a forecast of 2.7% growth in 2023.
Meanwhile, exports will also face weak global demand in the first half of this year with a modest recovery to 4.8% at the end, along with low-capacity utilization, which will deter investment in manufacturing.
One of the challenges would be the arrival of Chinese tourists that missed the government’s expectations last year due to slower-than-expected recovery in the Chinese economy. The authority expects to see 34.5 million tourist arrivals this year.
According to CLSA, earnings are expected to be weak, following poor performance of key sectors in the fourth quarter of 2023. Thai banks are being dragged down by NPLs, retailers by low Same Store Sales Growth, energy by declining oil prices and the utilities sector by the fuel transfer reduction.
Luckily, Foreign Direct Investment (FDI) prospects are improving driven by the EV sector with major Chinese producers investing more and more in Thailand. The value of FDI grew 70% year-on-year during the first nine months of 2023 to THB 380 billion.
Additionally, CLSA expected a Federal Reserve rate cut and China’s economic recovery as the two key drivers in 2024. Despite an imminent move by the Fed, CLSA estimated earnings growth of listed companies in the Thai Stock Exchange to increase only 8% in 2024, which was well below Bloomberg forecast of 16%. The brokerage firm also cut SET Index target this year from 1,734 to 1,422 as well.
As for the investment strategy in this dire outlook for the Thai stock market, CLSA recommended investors to look for stocks with specific drivers and solid earnings. TOP (TP 70), BDMS (TP 34), TIDLOR (TP 26), CPALL (TP 82) and HMPRO (TP 17) are CLSA’s top picks.
