Thai Stock Market Reacts Positively to Central Bank Rate Cut
The recent interest rate cut by the Bank of Thailand is expected to benefit various sectors, while posing challenges for banking stocks.
The Thai stock market has seen a positive response to the Bank of Thailand's unexpected interest rate cut of 25 basis points, which has been deemed beneficial for leasing, real estate, retail, and healthcare sectors.
Analysts from various brokerages have highlighted that non-bank finance companies will particularly gain from lowered funding costs, leading to stabilized prospects for non-performing loans.
Rakpong Chaisuparakul, senior vice-president at KGI Securities (Thailand), emphasized that the policy decision will favor property stocks, as commercial banks are likely to adjust their lending rates downward.
This situation may also offer competitive interim dividend yields for investors in these sectors.
Asia Plus Securities (ASPS) has identified several finance stocks poised to benefit from the rate reduction.
Among their top picks are Srisawad Corporation (SAWAD), Tisco Financial Group (TISCO), Muangthai Capital (MTC), and Ngern Tid Lor (TIDLOR).
They also suggest looking into dividend stocks such as Intouch Holdings (INTUCH), Central Pattana (CPN), Land and Houses (LH), Supalai (SPALI), Sansiri (SIRI), SC Asset Corporation (SC), and AP Thailand (AP).
Furthermore, a depreciation of the Thai baht is expected to enhance the performance of companies like Airports of Thailand (AOT), Erawan Group (ERW), Thai Union Group (TU), and Central Plaza Hotel (CENTEL), as noted by ASPS.
Following the rate cut announcement, the Stock Exchange of Thailand (SET) index saw an increase of 24.75 points, or approximately 2%, reaching 1,231.14 points.
The trading value for the day amounted to 62 billion baht, marking the highest single-day trading amount recorded this year.
Despite this gain, it is important to note that the Thai bourse has faced significant challenges, with a 12.1% decline year-to-date, making it one of the poorest-performing markets globally.
Daol Securities (Thailand) reported that the interest rate reduction poses potential risks for banking stocks, predicting a decrease in interest income for major banks like Bangkok Bank (BBL), Krungthai Bank (KTB), Kasikornbank (KBANK), and Siam Commercial Bank (SCB).
Although net profits for these institutions may suffer, smaller banks such as Kiatnakin Phatra Bank (KKP) and Tisco Bank might experience favorable outcomes as a result of the rate cuts.
The brokerage anticipates that if another rate cut of 25 basis points occurs, it could affect the banking sector's net profit projections by approximately 3%.
Nonetheless, Daol maintains an overweight stance on the banking sector due to its overall strong performance, with KTB and BBL being considered as potential stock picks.
Looking ahead, Daol Securities foresees the Monetary Policy Committee's upcoming meeting on April 30, where adjustments to the GDP growth forecast may be forthcoming.
Expectations indicate a slight reduction in the growth estimate from 2.9% to just above 2.5%, reflecting challenges within the manufacturing sector, heightened competition from imports, and uncertainty regarding trade policies following developments in the United States.
Additionally, Krungsri Securities projects the interest rate cut as a positive development for the SET index, estimating an uplift of around 40 points as it supports sectors that include high-yield stocks like Advanced Info Service (ADVANC) and companies with significant debt such as Minor International (MINT) and CP All (CPALL).
Analysts from various brokerages have highlighted that non-bank finance companies will particularly gain from lowered funding costs, leading to stabilized prospects for non-performing loans.
Rakpong Chaisuparakul, senior vice-president at KGI Securities (Thailand), emphasized that the policy decision will favor property stocks, as commercial banks are likely to adjust their lending rates downward.
This situation may also offer competitive interim dividend yields for investors in these sectors.
Asia Plus Securities (ASPS) has identified several finance stocks poised to benefit from the rate reduction.
Among their top picks are Srisawad Corporation (SAWAD), Tisco Financial Group (TISCO), Muangthai Capital (MTC), and Ngern Tid Lor (TIDLOR).
They also suggest looking into dividend stocks such as Intouch Holdings (INTUCH), Central Pattana (CPN), Land and Houses (LH), Supalai (SPALI), Sansiri (SIRI), SC Asset Corporation (SC), and AP Thailand (AP).
Furthermore, a depreciation of the Thai baht is expected to enhance the performance of companies like Airports of Thailand (AOT), Erawan Group (ERW), Thai Union Group (TU), and Central Plaza Hotel (CENTEL), as noted by ASPS.
Following the rate cut announcement, the Stock Exchange of Thailand (SET) index saw an increase of 24.75 points, or approximately 2%, reaching 1,231.14 points.
The trading value for the day amounted to 62 billion baht, marking the highest single-day trading amount recorded this year.
Despite this gain, it is important to note that the Thai bourse has faced significant challenges, with a 12.1% decline year-to-date, making it one of the poorest-performing markets globally.
Daol Securities (Thailand) reported that the interest rate reduction poses potential risks for banking stocks, predicting a decrease in interest income for major banks like Bangkok Bank (BBL), Krungthai Bank (KTB), Kasikornbank (KBANK), and Siam Commercial Bank (SCB).
Although net profits for these institutions may suffer, smaller banks such as Kiatnakin Phatra Bank (KKP) and Tisco Bank might experience favorable outcomes as a result of the rate cuts.
The brokerage anticipates that if another rate cut of 25 basis points occurs, it could affect the banking sector's net profit projections by approximately 3%.
Nonetheless, Daol maintains an overweight stance on the banking sector due to its overall strong performance, with KTB and BBL being considered as potential stock picks.
Looking ahead, Daol Securities foresees the Monetary Policy Committee's upcoming meeting on April 30, where adjustments to the GDP growth forecast may be forthcoming.
Expectations indicate a slight reduction in the growth estimate from 2.9% to just above 2.5%, reflecting challenges within the manufacturing sector, heightened competition from imports, and uncertainty regarding trade policies following developments in the United States.
Additionally, Krungsri Securities projects the interest rate cut as a positive development for the SET index, estimating an uplift of around 40 points as it supports sectors that include high-yield stocks like Advanced Info Service (ADVANC) and companies with significant debt such as Minor International (MINT) and CP All (CPALL).
