JP Morgan Cuts Thailand Equity Targets Amid Economic Weakness

J.P. Morgan recently revised down its targets for Thailand’s SET/MSCI Thailand Index to 1500/500 from 1700/550. The bank noted that economic activities in Thailand have considerably weakened over recent months, coupled with concerns over Fed’s rate cuts, leading to a more selective approach in investment opportunities.

Persistent inflation above the US Fed’s target of 2% has lowered the chance for a rate cut in the near-term, while also leading to capital outflows, Baht depreciation, and persistence of higher interest rates, which are anticipated to pressure equity valuations. However, the resurgence in external demand, particularly in the manufacturing sector tied to the EV/tech supply chain, is viewed as a potential growth catalyst. Furthermore, the digital wallet program is expected to contribute to Thailand’s economic stabilization by late 2024.

Interestingly, Thai domestic fund managers have been cutting equity holdings while increasing cash positions. Specifically, Thai local funds curtailed equity holdings in February and raised cash weightings to 10.6%, the highest since 2022. This resulted in decreased holdings in transportation, ICT, and F&B sectors.

On the bright side, it was noted that healthcare, telecom, and IT were sectors to watch, with healthcare and telecom upgraded to ‘Overweight’ and IT moved to a ‘Neutral’ position from ‘Underweight’. Meanwhile, financial sectors was downgraded to ‘Underweight’ and utilities was cut to ‘Neutral’

Top stock picks advised by J.P. Morgan includes AOT, BH, BDMS, CPALL, PTTEP, TOP, HMPRO, and TRUE.

In conclusion, political, global, and economic pressures are forcing investors and Thai domestic fund managers to be more selective, cautious, and strategic in their investment decisions.