Local market bullish on likely Fed rate cut

Brokerages predict further upside

Thai equities are expected to rise further after the Stock Exchange of Thailand (SET) bounced back to break the key psychological level of 1,300 points on expectations the Federal Reserve will cut interest rates at its meeting this week, coupled with signs of easing global trade tensions.

Nattapon Chansivanon, chief investment officer at UOB Asset Management (UOBAM), said the Thai stock market has turned bullish in anticipation of the Fed’s rate move.

He projected the Fed would cut rates three more times this year, including at its meeting on Sept 16-17, bringing the policy rate to 3.75% by year-end, with further cuts next year taking the rate to 3-3.25%.

On the domestic front, the formation of a new government and growing expectations of lower rates have attracted foreign fund inflows.

Foreign investors have been net buyers of Thai equities worth 2-3 billion baht, with inflows potentially reaching 5 billion by year-end.

“This optimism is supported by stimulus measures that could drive Thai GDP growth to 1.8-2% in 2025,” said Mr Nattapon.

The baht is trading between 31.5 and 32 to the dollar, also attracting foreign capital into local equities.

UOBAM anticipates the Bank of Thailand may cut rates at its final meeting of the year, driving the SET index to 1,350-1,400 points by year-end, he said.

Foreign and domestic investors remain focused on big-cap SET50 stocks, particularly in the energy and banking sectors.

However, banking shares may see limited upside due to narrowing net interest margins in a falling rate environment.

Mr Nattapon recommended for the remainder of this year, investors should allocate their portfolios with 60% in fixed-income funds and 40% in equity funds, split into 20% US equities and 20% across Thai and other emerging markets, particularly Indian and Vietnamese stocks.

Meanwhile, Asia Plus Securities (ASPS) said the SET index has risen for seven consecutive sessions, reaching a seven-month high above 1,300 points, supported by falling global yields, easing external risks and improving domestic political sentiment.

ASPS sees further upside for Thai equities, driven by both fiscal and monetary stimulus.

The brokerage highlights the tourism sector as a standout, entering its high season in the fourth quarter, starting with China’s Golden Week holiday.

Historical data shows tourism stocks have consistently outperformed, averaging 2.78% gains in September over the past four years, compared with returns of other industries ranging from 0.7% to -4.5%.

“The SET index rose seven days straight and posted a seven-month high at around 1,300 points as negative global factors subsided and Thailand’s political situation improved,” the brokerage noted.

The Thai index may rise further thanks to fiscal stimulus and monetary easing measures, noted ASPS.

The brokerage recommends tourism plays, with the top picks Airports of Thailand (AOT), Erawan Group (ERW) and Minor International (MINT).

The SET index closed at 1,306.38 points at midday on Tuesday, up 6.60 points or 0.51%, in trade valued at 25.8 billion baht.