SET Outperforms Global Markets in Gain, Paving the Way to Break 1,500 Resistance Level!

SET Index has been performing outstandingly in December, beating other indices as a second top performer during a one-week period with a gain of 4.56%, while ranking 6th in a one-month period, according to the data on investing.com as of 17:00 local time in Thailand on December 9, 2020.

 

SET gained 5.2% in December to close at 1,482.67 points on December 9, 2020, and 24% since November. The index briefly surpassed the 1,500 resistance level, and pulled back after facing profit-taking.

 

Global stocks have been responding positively since news about Pfizer and Moderna’s coronavirus vaccine broke out that performed 95% against the virus, followed by Oxford/AstraZeneca with 90% effectiveness.

 

Thailand is among one of the countries to gain the most benefit from the vaccine as the country relies heavily on tourism, which accounted for over 20% of its GDP in 2019, while Tourism receipts alone accounted for almost 14% of GDP in Thailand. With the availability of the Covid-19 vaccine, Thailand’s economy could be opened more freely without much worry of contracting the deadly virus.

 

Shortly after the announcement of the coronavirus vaccine, fund flow began to seek underperformed markets, which are none other than emerging markets that are still lacking behind.

The MSCI rebalance and SET50/100 addition and deletion helped fuel the attractiveness from foreign investors to the Thai stock market, even though the country is facing a new local transmission of Covid-19. The situation is still under control in a very limited area as Thailand reported only two local transmission since the incident of Thai Covid-carried women entering the country illegally, causing the government to urgently investigate their travelling routes to prevent the virus from emerging.

 

The upgrade in Thailand’s outlook from “Neutral” to “Overweight” by Credit Suisse also boosted the fund inflow to the country. Credit Suisse expected SET Index to reach 1,660 points in 2021, giving an “Overweight” outlook in banking, petrochemical, hospitality, tourism and retail sectors.

As a global wealth manager, investment bank and financial services firm, Credit Suisse expected Asian stocks to outperform global markets next year, supported by an “earning super-cycle” to be kicking off across the region.

Currently, Asian stocks are still under-owned by foreign investors, thus, improving exports and appreciating currencies will also support the market in Asia as well.

Amid countries in Asia, Credit Suisse stated that Thailand has the best potential turnaround story, especially in the second half of 2021.

 

An American multinational investment bank, JP Morgan, also stated that the firm sees opportunities for stocks in Brazil, Indonesia, South Korea as well as Thailand, expecting stocks in emerging markets to rise as much 20% in 2021 after being largely ignored by investors this year.

 

Maybank Kim Eng stated that the Thai stock market rose outstandingly mainly driven by the continued capital inflows over the past 1 month. Foreign investors net bought totaling more than THB40b, resulting in the overall foreigners’ net sales of about THB263b.

Overall, in the next period, Maybank still believed that capital inflows should flow continuously driven by supporting factors from 1) Thai economic signs are likely to improve. Thailand’s GDP this year is forecast at -6.2% and expanding in 2021, 2022 at +5%, +4.5%, respectively, 2) Economic stimulus programs from The government sector have been gradually released. 3) Positive development of vaccines. This will help support the recovery of the tourism sector in the next period. 4) Maintaining policy interest at a low level continuously.

These factors are expected to support the upturn in the SET index in the medium term. While in the short term, the SET is preparing to test a key psychological resistance level at around 1500 points, which may see some profit-taking pressure. However, Maybank believed that in the end, it will be able to pass through such an area. Therefore, when the market crashes and corrects, it is an accumulative buy opportunity.