Bualuang Securities (BLS) has lowered its year-end forecast for the Stock Exchange of Thailand (SET) index from 1,466 points to 1,396 points. This revision reflects anticipated volatility in the Thai stock market over the remaining months of 2024, driven by a blend of international and domestic challenges.

Managing Director Chaiyaporn Nompitakcharoen explained that the recalibration is informed largely by a slowdown in economic growth among Thailand's significant trading partners, particularly the US, alongside ongoing uncertainties in global and domestic political landscapes. "The Thai stock market's return in local currency this year has been the least favorable among Asian markets," Mr. Chaiyaporn remarked, highlighting the challenges faced by the SET.

The Thai stock market's underperformance is not new. It has struggled for two consecutive years, with significant setbacks recorded last year as well. Midway through 2023, the index experienced a decline exceeding 10%, primarily due to lower-than-expected growth in corporate earnings, which increased only 3% year-on-year in the first half, amid slow government budget disbursement.

Further complicating the outlook are the potential impacts of the proposed digital wallet project, which faces implementation obstacles, and competitive pressures from low-priced Chinese imports that threaten local businesses. Despite these hurdles, BLS anticipates a possible turnaround for listed companies, projecting a 7.5% profit growth driven by a recovery in tourism and exports in the latter half of the year.

Bualuang Securities also signaled that additional government stimulus measures, such as the digital wallet project, could provide a short-term boost to both the economy and the stock market. The brokerage forecasts that cash handouts could lift GDP by 0.3 percentage points, up from an earlier estimate of 2.6%.

However, several risk factors remain on the horizon. The US-China trade war could escalate, particularly if Republicans clinch victory in the upcoming US presidential election, potentially hampering Thai exports. Interest rate movements also warrant close attention. BLS anticipates the Bank of Thailand might lower interest rates in the final quarter of 2024, while the US Federal Reserve is expected to enact three rate cuts totaling 0.75 percentage points due to a slowing US economy.

Reflecting these uncertainties, BLS has reallocated its investment strategy for 2024, reducing the weight of risky assets in its portfolio from a substantial 60-80% at the year's start to a more conservative 20%. Short and long-term debt instruments now constitute 80% of their holdings.

Investment recommendations from BLS include reducing exposure to the Vietnamese stock market from 13% to 9% and trimming US investments from 12% to 6%. The firm has allocated only a modest 2% of its portfolio to the SET, focusing primarily on sectors such as tourism and healthcare, which are expected to benefit from a recovering domestic economy.