CLSA’s recent macro strategy analysis highlights a complex landscape for Thailand’s markets, focusing on significant buying patterns by foreign investors while noting sectors under pressure. Banks remain the centerpiece of foreign investment due to their robust performance despite lackluster structural reforms and political uncertainties.
Investment Patterns and Sector Movement
In the current economic climate, foreign investors are overwhelmingly buying into banks, including key players such as BBL, KBANK, KTB, KKP, SCB, TTB and TISCO, reflecting a strong 18% rebound in the SET Index since its June low. Cyclical sectors like energy and materials, including firms like CPF, PTT, TOP and SCC, also saw increased foreign interest.
Conversely, foreign divestment in healthcare and retail, including stocks like BDMS, BTS, CPALL, CRC, and TIDLOR, indicates a diverse outflow trend. Certain events, such as SACA’s sale of a 16.3% stake in TIDLOR to BAY, have exacerbated these outflows.
Caution in Domestic and Cyclical Sectors
Amid concerns over declining consumption, the outlook for domestic consumer sectors suggests potential devaluation. In cyclical industries, recent international developments in petrochemicals could prompt a reversion rally, particularly for companies like IRPC, IVL, PTTGC and SCC.
Political and Economic Challenges
For the year to date, foreign investors have sold a net US$2 billion in Thai equities, spurred by apprehensions over political instability and insufficient structural reforms. July was the only month with net buying of US$490 million. Political rulings in late August and September could further influence the market, particularly the outcome involving PM Paetongtarn, which has potential implications for the government’s stability.
Tourism as a Recovery Indicator and Strategic Picks
CLSA indicates tourism as a pivotal factor for economic recovery, with current arrivals standing at 20.8 million — only 84% of pre-pandemic levels and a crucial component for sustainable growth. Consequently, CLSA has adjusted its strategic picks, excluding OSP from its top recommendations due to anticipated demand decline. The revised list now includes robust candidates such as BDMS, CPALL, CPAXT, CRC, CPN, MTC, IVL and WHA, suggesting these maintain favorable valuations amidst the broader economic landscape.
