The Thai equity market has recently experienced a significant uplift, prompting investors to assess the durability of this rally. According to an analysis from Kiatnakin Phatra Securities (KKPS), the SET Index has climbed 14% since its low on 23 June, primarily driven by a notable rebound in a few oversold large-cap stocks.
Five Key Drivers Behind the Rally
KKPS identifies five primary factors that have fuelled the recent market surge:
- Speculation on US Tariff Surprises
- Easing Political Concerns
- Dovish Hope for New BoT Governor
- New Inflows from ESGX Funds
- Positive Seasonality
KKP suggests that the SET Index’s momentum could potentially be sustained—or even continue to rise—even without broader market participation, largely due to the influence of heavyweight constituents such as DELTA.
Short-Term Outlook: A “Short-Leg” Rally
Despite the recent gains, KKPS characterises the upswing as a “short-leg” rally, indicating it may not be fundamentally broad-based. Their market breadth indicator has improved only slightly since Liberation Day, rising by just 2 percentage points to 14%. This suggests the rally remains concentrated, with no significant improvement in underlying fundamentals.
Over the past three months, while the market returned 5%, earnings growth contributed negatively by 3%. In contrast, valuation expansion added a strong 8%—notably at the 90th percentile compared to pre-COVID norms. KKP believes this euphoric sentiment has largely been priced in. They highlight upcoming August events—such as trade negotiations and corporate earnings—as key inflection points for the market.
For the near term, KKP projects a possible SET Index range of 1,200–1,300. Given this outlook, they advise reducing positions in stocks with weak fundamentals. Conversely, momentum and oversold stocks with limited exposure to macro shocks (such as trade, tourism, and politics) may continue to outperform.
Medium-Term Strategy: Navigating Event-Driven Swings
Looking further ahead, KKPS identifies four critical events that could trigger significant market volatility—despite what they perceive as growing complacency:
- Trade Negotiations (August 2025)
- 2H25 Earnings Under New Tariffs (August 2025)
- Monetary Policy Panic (October 2025)
- Parliament Dissolution (December 2025)
KKP warns that markets appear to be pricing in upside scenarios more heavily than downside risks. As a result, they maintain a year-end SET Index target of 1,230, citing limited sustainable fundamental catalysts.
Tactical Sector Adjustments
While defensive strategies typically outperform in bear markets, KKPS has made tactical adjustments to sector allocations to capture near-term opportunities:
- Materials: Upgraded to overweight, supported by expectations of China stimulus and constructive trade talks.
- Finance: Also raised to overweight, anticipating potential policy-driven volatility.
- Electronics: Adjusted to marketweight.
KKPS also highlights specific stock picks: ADVANC, BCH, CENTEL, CPN, GLOBAL, and PTTGC.
