Pi Securities wrote that data from 2022, a year marked by interest rate increases by the U.S. Federal Reserve, revealed the Thai stock market’s strong performance in certain sectors one month after such hikes. The most notable outperformers included the health sector, which saw gains of 7.5%, the commerce sector with an increase of 6.8%, and the ICT sector, which rose by 5.5%.
The brokerage assessed that during periods when the Fed raises interest rates, there is a high likelihood of the Thai baht depreciating in response to the strengthening US dollar. This environment tends to benefit export-oriented stocks—suggesting an appeal in i-Tail Corporation (ITC) and Thai Union Group (TU).
Additionally, the rising trend in interest rates and government bond yields is projected to have a positive impact on the commercial banking sector. Pi Securities suggests investment in Bangkok Bank (BBL), Kasikornbank (KBANK), Krungthai Bank (KTB), and SCB X (SCB).
The health sector is also favored, given its historically robust growth during periods of rising interest rates. Recommendations in the segment include Bangkok Chain Hospital (BCH), Bumrungrad Hospital (BH), and Praram 9 Hospital (PR9).
However, the analyst cautions that the current interest rate upcycle from the Fed is expected to be short-lived, with yields anticipated to decline in the near future. Against this backdrop, Pi Securities views the recent pullback in non-bank financial stocks as a compelling accumulation opportunity, particularly for Muangthai Capital (MTC), Srisawad Corporation (SAWAD), and Tidlor Holdings (TIDLOR).
Looking further back to the interest rate upcycle from 2015-2018, historical data shows that the S&P 500 posted an average annual return of 8.4%. At the sector level, technology delivered the highest gains with an average annual return of 21%, followed by health care at 12% (or 9.7% according to another data set), and the industrial sector at 7.7%. This suggests that interest rate hikes do not necessarily exert significant pressure on risk assets, provided corporate earnings growth remains robust.
