Strategy Note /
Global

Thai Market Strat- Inflation and growth—opportunities ahead of the dust clearing

  • Through the eye of the storm

  • Weathering the storm—focus on profit quality & discounted prices

  • Scope for alpha plays

Poramet Tongbua
Poramet Tongbua

Equity Research Analyst

Piriyapon Kongvanich
Piriyapon Kongvanich

Equity Research Analyst

Bualuang Securities
21 June 2022

The market has largely priced in inflation jitters, we believe, and has shifted focus to the risk of slowing global economic growth. A temporary pullback is expected, which would open an alpha opportunity. Looking to 2H22, we expect stronger earnings growth (a low 3Q21 base and tourism high season in 4Q22) in tandem with faster GDP expansion. That recovery should attract foreign fund inflows. We prefer the following plays: 1) inflation hedges, 2) post-COVID normalization, and 3) faster earnings growth in 2Q-3Q22 (with clear earnings visibility and price discounts).

Through the eye of the storm

Although Thailand marked a 13-year Inflation high for May (core inflation was only 2.28%), crude prices are now steady-ish, so we expect inflation to peak sometime in 3Q22, then start easing. In any case, the market has largely priced in the inflation jitters, we believe, and will eventually transition to anticipating accelerating GDP growth. But in the meantime, price pressures will dampen macro-economic conditions and earnings prospects until headline inflation eases. Thai bond yields have risen somewhat this year, limiting the scope for upside to Thai equities for the moment.