Sentiment improving, but watch for political risk

Global stock markets have rebounded as the market predicts an 80% likelihood the US Federal Reserve will cut interest rates at its Dec 9-10 meeting, up from less than 40% earlier.

A productive phone call between US President Donald Trump and Chinese President Xi Jinping, and an expected face-to-face meeting in Beijing in April 2026, also eased global concerns over tariffs and geopolitics.

Furthermore, the market expects Kevin Hassett, a Trump advisor and likely candidate to succeed Fed chair Jerome Powell next May, could push for more aggressive rate cuts.

The S&P 500, after a short-term correction of roughly 5%, has begun to recover and rose past 6,800 points due to easing concerns over the high valuations of technology and artificial intelligence (AI) stocks, as well as clarity on the interest rate outlook.

We expect the index to retest its all-time high of 6,900 before the Fed meeting this week. We also reiterate our overweight rating on US, Chinese and Indian stock markets.

ASEAN MARKETS

Southeast Asian equity markets saw a tug-of-war between buoyant global monetary expectations and severe regional headwinds. Broadly, the region benefited from renewed “risk-on” sentiment globally.

However, domestic resilience was tested by a series of catastrophic storms and flooding that swept through Thailand, Malaysia, Vietnam and the Philippines late in November. These natural disasters dampened local sentiment, disrupted economic activities and capped gains for the indices in affected nations.

Indonesia’s Jakarta Composite Index reached record levels above 8,500 and 8,600 as investors rotated towards domestic demand and commodity stories. Singapore’s Straits Times Index also traded near all-time highs around 4,500 to 4,575, helped by banks and property funds, as well as its role as a regional AI and data centre hub. For the first time in over a decade, the Philippines appears attractive with valuations trading below 10 times expected earnings.

THAI OUTLOOK

We expect the Stock Exchange of Thailand (SET) to trade within a range of 1,220 and 1,290 points this month. Thai politics is likely to re-emerge as a key driver of market swings when parliament reconvenes on Dec 12.

The main risk is an early House dissolution if the opposition files a no-confidence motion, which would result in a caretaker government unable to approve new budget commitments. Key stimulus programmes such as the second phase of the “Khon La Khrueng Plus” co-payment scheme, Thai Individual Savings Account stock investment programme, and US-Thailand tariff negotiations may be delayed.

This uncertainty may weigh on the SET in the near term until the election timeline becomes clearer. In the past two elections, the SET rose an average of 3% in the two months before voting, led by domestic consumption groups.

Monetary policy expectations remain supportive with the Bank of Thailand likely to cut its key rate by 25 basis points at its Dec 17 meeting. Inflows to Thai ESG funds, year-end window dressing by fund managers, and attractive valuations should help cap downside risks, with flows likely concentrated in large-caps. Our December stock picks are:

AOT (target price 49 baht): We see a positive impact from passenger service charge (PSC) increases in the second half of the airport operator’s 2026 fiscal year that began on Oct 1, which should strengthen earnings visibility and support future airport expansion. Despite the prospect of a 30% decline in the minimum annual guarantee under a new contract with the ailing duty-free operator King Power, we see limited downside, with upside from transit-transfer PSC collection and improving concession revenue.

HMPRO (target price 8.30 baht): We expect an earnings recovery for the home improvement retail chain in the fourth quarter of 2025, driven by seasonality and continued store expansion. We also see an additional medium-term benefit from the post-flood home improvement cycle, which should support demand for renovation and replacement products.

TRUE (target price 15 baht): The telecom operator remains one of the key beneficiaries of a declining interest rate environment and easing domestic financial conditions. Balance sheet restructuring, improving momentum of earnings before interest, tax, depreciation and amortisation, and reduced refinancing risks should continue to support the case for a valuation re-rating. We see an attractive risk-reward profile at current levels.

Source – Bangkok News