FSS International Investment Advisory Securities (FSSIA) notes in its report that the usual “Sell in May” trend is unlikely to hit the Stock Exchange of Thailand (SET) this year, following a sharp 17% decline in the index year-to-date. However, this outlook hinges on key determinants such as the outcomes of Thai-US trade negotiations and first-quarter earnings reports for 2025.
While there is optimism for favorable trade developments, earnings are expected to be comparatively weak.
Foreign investment is projected to stay concentrated on the bond market, given Thailand’s muted growth prospects and a dovish monetary stance. Global markets experienced turbulence after the U.S. announced higher-than-expected tariffs, but recent accommodating comments from President Trump about China have slightly calmed investor nerves.
The analyst points out that the U.S.’s temporary 90-day tariff exemption and the possibility of future tariff reductions are critical to watch, especially after the International Monetary Fund (IMF)’s significant downgrade of the 2025 global growth forecast.
The U.S. economy is anticipated to suffer primarily from slower growth rather than inflation, with Federal Reserve officials hinting at potential rate cuts as soon as June 2025. This comes amid a 60% probability of a rate cut being priced in, contingent on worsening labor market conditions. Should U.S. inflation come in lower than expected, it might relieve some pressure on the Fed, thereby boosting equities and other risky assets.
On the domestic note, Thailand’s GDP for the first quarter of 2025 is expected to grow by 0.7% quarter-on-quarter and 3% year-on-year, buoyed by strong exports and steady consumer spending, despite an overall weak momentum.
FSSIA states that the outlook for the second half of 2025 is uncertain, with potential downsides from U.S. tariffs on Thai goods. The Bank of Thailand (BOT) has recently adjusted its GDP forecast to 2% and its policy rate to 1.75%, with the possibility for further cuts if global challenges intensify.
For listed Thai companies, first-quarter net profits are projected to rebound by 18% quarter-on-quarter from a low base in the fourth quarter of 2024, but to decline by 4% year-on-year. High performers are expected in the food, ICT, and commerce sectors, while energy, property, tourism, and media might underperform.
As a result, the analyst put on a conservative target for the SET Index in 2025, standing at 1,180 points, based on an earnings per share (EPS) of THB 84 and a price-to-earnings ratio (PER) of 14x. However, this target could increase to 1,230-1,270 if Thai-U.S. trade negotiations succeed in reducing tariffs.
Meanwhile, despite its attractive valuation, the SET Index is likely to trade at a discount due to limited long-term growth potential and return on equity (ROE) from structural constraints.
Amid slow economic growth with looming uncertainties, the analyst suggests investors be selective, focusing on consumer staple companies with strong first-quarter results and resilient outlooks for the rest of 2025. Preferred picks include BA, BTG, CPALL, KBANK, MTC, NSL, PR9, and STECON.
