SET sinks to pandemic levels again

After falling 4.8% in January, the Stock Exchange of Thailand (SET) index continued to wobble in February, losing an additional 8.4% of its value. The trend continued this month, with the market currently sitting around 1,170 points, and not far above its low for the year.

That puts the SET at levels not seen since the pandemic although there isn’t a comparable crisis this year.

The beginning of January was filled with bad news, while news in February did not have any significant negative impact on the SET. But the fact that long-term equity fund position, worth an estimated 180 billion baht as at early February, was maturing weighed on market sentiment.

In addition, lacklustre earnings of market heavy-weight Delta Electronics led to a panic-selling push for the stock, which fell over 40% in February and pulled the SET down by more than 50 points. AOT, meanwhile, was told that payment from King Power would be delayed, creating concern in the market that payment period would be extended or another discount would be given for the duty-free operator.

Stocks of AOT have slumped nearly 30% since reports of the trouble with King Power surfaced on the market, which had prompted the SET to drop by 8.4% in February to 1,203.72 points.

The average daily turnover rose 34.4% month-on-month to 51.4 billion baht in February.

TARIFF TURMOIL

The escalating trade war has emerged as a major risk to the Thai stock market. Donald Trump, the president of the United States, imposed 25 percent tariffs on almost all of the goods coming from Canada and Mexico, but actually ended up removing some of them, while also never-endingly threatening new tariffs that started to confuse the markets globally. Many imports from China also face extra tariff of 10-20%, causing ripples of trade waves around the world, and Thailand is no exception.

Trump also said that reciprocal tariffs will be charged against every country that taxes US goods at a higher rate than the one charged in the US. That puts Thailand in the crosshairs because it has some of the highest tariffs on US goods for many products.

By contrast, the Bank of Thailand surprised markets by cutting its benchmark interest rate by 25bps to 2.0% in February, and much earlier than expected, as reflected in Thailand’s lacklustre economic outlook. But the interest rate cut didn’t turbocharge the stock market.

Adding insult to injury, earnings posted by listed Thai companies for the fourth quarter were lackluster, pulling down the profit outlook. Close to half (47%) of companies so far have reported earnings below market expectations; just 30% beat expectations and 23% matched it. The sheer number of misses raised the prospect of more profit-per-share revisions lower by market analysts.

Without any good news to go on, the market fell further all through February and has been in a tailspin ever since, recovering almost nothing so far in March.

STOCK PICKS

Our focus is on profits and also the type of stocks will be targeted inclusion in Thai new ESGX funds. This month’s selections include industrial estate operator Amata Corp (AMATA), Bangkok Hospital chain operator Bangkok Dusit Medical Services (BDMS), Krungthai Bank (KTB) and worldwide hotel and restaurant operator Minor International (MINT).

AMATA: Our top pick domestic Industrial Estate plays. Its 2024 earnings were strong for stock expectations, increasing 41% year-on-year to 3.4 billion baht and realised sales comprised of 3,000 rai of land amounting to 15 billion baht. The company also has a strong backlog of 21 billion baht as at end of 2024. Plans capital expenditure of 6-7 billion baht mainly in Thailand for its Chon Buri 2 project and hopes to enhance its projects in Laos. Recently, AMATA declared a 0.50-baht-per share dividend, giving it a yield of about 4%.

In the healthcare sector, we continue to maintain BDMS as our top pick, with its fourth-quarter net profit coming in at 4.3 billion baht, up 10% year on year and up 2% quarter on quarter. Revenue grew 4% year on year but fell 2% to 28 billion baht from the previous three months. Top-line growth owed mostly to foreign patients (up 8% year-on-year), who accounted for 28% of the total. And while Q1 2025 profit may decline versus Q4 2024 due to seasonal dynamics, we expect it will be up YOY given that patient numbers are growing this year. BDMS also declared 0.40 baht a share as a dividend for a 3% yield.

KTB still our top selections on banking as the sector will be the biggest outperformer vs SET this year. KTB’s net profit in the fourth quarter was over 1 billion baht with credit cost for the period also improving. It can be seen that thiskarma it has the opportunity to expand the non-performing loans is at risk due to high lending to the public sector (525 billion baht in quarter 3/3 percent quarter quarter up 25). KTB also declared a dividend of 1.545 baht per share for a near six per cent-a-year yield.

MINT is our top pick in the tourism sector. The company is also expected to witness growth from improving economic getting conditions in Europe, which is the source of most of its sales. The company is looking for 6-8% annual revenue growth and strong profit growth of 15-20%. MINT has plans to be more asset-light on hotel assets while continuing to improve productivity and margins in the long term. It also plans to expand into Thailand, expand its franchise network and grow the number of outlet restaurants in Cambodia, Laos, Myanmar and Vietnam, Indonesia and India. Lastly MINT declared a generous dividend of 0.35 baht a share.