SET on a Bullish Track as Market Strategizes on Strong Economic Indicators

The saying goes as “the market is a zero-sum game” – the saying implies for asset classes, a red bar for an asset class conversely poses a green bar for another class. The consensus could be applied for the Thai baht and the SET index in the current situation. While foreigner broker J.P. Morgan is super optimistic on the SET to reiterate at 1,700 end of the year, prominent local broker Kasikorn Securities (KS) is cautious at 1,610 index points factoring in FED. The index this morning went up by 1.57 index points reaching 1,603.

Thai baht slipped from its two days peak to 32.755 dropping as much as 1.26%. Technical shows that the baht should fluctuate around 33.00 and 33.50. The investment strategy that could be drawn from this is exports to see a boost accounting for 80% of the gross domestic product (GDP), which is followed as a key driver for the economy at the time when the economy is at a stagnant stage. Earlier, July data shows as Thai baht continues to rally on a downward trend and global demand is on a recovery path, exports increased 20.27% in July from a year earlier beating the market consensus of 19.7% resulting in trade surplus of $183.56 million.

Sectors including agriculture, commodities, automobiles, electronics show promising grounds in exports contribution. The rising COVID infection rate across the country should be affected not manufacturing by a marginal extent given the government’s initiation of a pilot program of isolating vaccinated workers to limit disruptions in the manufacturing industry.

Fiscal and monetary policies should support the economy to slip further since from both the policy entails measures to keep the economy afloat.

On the other hand, the government is pacing up in the vaccination with 400k – 500k doses to be inoculated in August covering as much as 30% of the population with the first shot. According to estimates of J.P. Morgan by the end of this year, approximately 60% of the population would be fully vaccinated. Note that the estimates are under optimistic scenarios. Which would further strengthen the equity index with a bullish view of reopening at the end of September, bringing back tourism to the pre-pandemic level.

As of yesterday, the Health Ministry has already sought permission from the Center for COVID-19 Situation Administration (CCSA) to reopen dining at restaurants to the vaccinated. This reopening could set the pace for the reopening of other business establishments such as shopping malls, entertainment centers, bars and clubs in a systematic order. Domestic play BBL, HMPRO and CPN should benefit from gradual opening up domestically and full reopening plays includes AWC and AOT in the top list of the KS.