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https://www.nationthailand.com/pr-news/business/banking-finance/40024765

KBank and Lombard Odier identifies turning points as global economy likely to head for a mild recession

THURSDAY, FEBRUARY 09, 2023

They recommend increasing investments in fixed-income, global and China equities, and risk diversification through alternative assets

KBank Private Banking, in strategic alliance with Lombard Odier, a Switzerland-based global private bank, estimates the 2023 global economy to undergo a mild recession due to signs of disinflation, lowered risks around Europe’s energy crisis, and benefits from China reopening.

At the seminar “2023: A Year of Turning Points“, KBank Private Banking recommends investment strategies in response to major events in the global economy: minimizing portfolio volatility through alternative assets and increasing investments in fixed-income, global, China and Asia equities, and mixed funds as risk assets set to become more attractive.

KResearch expects Thai economic growth to accelerate from drivers in tourism while the export sector still faces pressure.

Jirawat Supornpaibul, Executive Chairman, Private Banking Group, KASIKORNBANK, said, “The investment landscape in 2022 was highly challenging due to the depreciation of almost all asset classes. However, economic conditions in early 2023 have been beneficial for investment so far, from gradual disinflation in goods despite service prices remaining high from the tight labour market, and policy interest rates of global central banks – particularly the US – close to reaching their peaks and likely stay at an elevated level throughout 2023. We expect the economies of developed countries to enter a Slow Down while emerging markets are likely to be boosted by China reopening.”

Jirawat Supornpaibul, Executive Chairman, Private Banking Group, KASIKORNBANK

Charl Kengchon, Executive Chairman of Kasikorn Research Center, added, “With Thailand’s economy continuing to regain recovery, KResearch has upgraded its 2023 GDP growth projection to 3.7 %, owing to an upswing in the tourism sector as China reopened the country sooner than previously forecast. According to the latest estimation, international tourist arrivals are likely to reach 25.5 million. Exports, however, remain under pressure from a slow global economy and a strong baht, which is expected to persist throughout the year. Thailand’s exports, therefore, are projected to contract by 0.5%.”

Charl Kengchon, Executive Chairman of Kasikorn Research Center

As for the global economy in 2023, Lombard Odier expects continuous pressures from various negative factors before the recovery can materialize, with three key takeaways as follows:

Inflation has started its descent but central banks will remain restrictive for a while

·       Inflation has peaked and is rolling over thanks to falling energy costs.

·       Service inflation remains elevated and related to the strength of labour markets.

·       Central banks should stop hiking in Q1’2023 but refrain from cutting rates for an extended period of time.

Europe & energy-driven supply shock

·       The prospect of a full-blown energy crisis this winter has become less likely. We see little risk of shortages.

·       On top of the benefits of a warm winter so far, European governments have taken measures to mitigate the impact on households and corporates.

·       New equilibrium in natural gas and oil markets reduces the impact of military developments in Ukraine.

China & zero Covid policy

·       Spiking cases and fatalities should create volatility in economic activities as consumers adjust to the novelty of the high infection environment.

·       Activities to accelerate on a faster timeline than our initial expectation, after volatility in Q1 due to COVID waves.

·       Government leaning on dovish monetary policy and industry deregulation to address downside risks from initial turmoil related to the rapid re-opening process.

Given the recent peak in US 10-year real yield and China reopening, Lombard Odier shared their ten investment convictions for 2023 based on major turning points to watch as follows:

Peak in 10-year real yield

Inflation has started to roll over. Monetary policy tightening in the western world, amid a global downturn in economic activity, translates into an unfavourable set-up for risk assets.

Macro conditions warrant a cautious exposure to risk assets focusing on assets that can better withstand the impact of weaker growth or higher rates.

Sovereign and high-quality corporate returns look promising in 2023.

Peak in US dollar

We prefer quality and diversification across asset classes. We look for quality companies with the ability to defend their margins and be exposed to China reopening.

Earnings per share (EPS) will be revised downwards as margins squeeze due to elevated input costs and reduced customer buying power.

Emerging markets will be boosted by China’s Reopening. After a Fed pivot, we expect emerging assets to rebound. However, a shift in sentiment and growth dynamics is needed.

Recession

Given current volatility levels and upcoming geopolitical concerns, we recommend asymmetric return profiles.

Global growth and real yield models have turned for a weaker USD in 2023

High-yield credit will become increasingly attractive as investor sentiment improves, and the appetite for risk assets will increase.

Start of rate cuts

With lower rates, a weaker US dollar, and China reopening, gold prices should rise.

Jirawat concluded that “In response to key turning points of this year’s global economy, we recommend clients to expand return opportunities through alternative assets, such as hedge funds and private assets, and increase investments in fixed-income, global equities under the theme Winner of the New Economy, China and Asia equities under the theme The Rise of China and Asia, as well as sustainability funds and mixed funds, namely K-ALLROAD Series to minimize portfolio risks.”

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https://www.nationthailand.com/business/banking-finance/40024610

Upcoming Money Expo to showcase green finance

SATURDAY, FEBRUARY 04, 2023

This year’s Money Expo will highlight environmentally friendly financing to raise awareness of global warming and the importance of green financing, according to its organiser, Money and Banking magazine.

The expo will draw major players in the financial services industry, including banks, financial companies, nonbanks, insurance companies, securities companies, asset management companies, as well as government and private agencies, Money and Banking magazine chairman Santi Viriyarungsarit said.

This year’s Money Expo will comprise seven expos, with the first and last in Bangkok. Five other expos will be held in Songkhla, Nakhon Ratchasima, Rayong, Udon Thani, and Chiang Mai provinces.

Santi said that green finance was a solution to attain net-zero emissions. Many countries, including Thailand, pledged to achieve net-zero emissions by 2050 during the 26th United Nations Framework Convention on Global Climate Change, he said.

Green financing encompasses green bonds, green equity funds, green loans, and green deposits, Santi said.

Last year, the Thai government began supporting green financing and its Bio-Circular-Green economic model by implementing standards to classify economic activities based on their environmental impact, he added.

The amount of green financing globally soared more than 100 times between 2011 and 2021, according to research by global banks. Its global value is expected to reach US$6 trillion per year in 2030, said Santi.

This year’s Money Expo will kick-off in Bangkok in May:

1. Money Expo Bangkok: May 11-14, Challenger Hall 2-3, Muang Thong Thani

2. Money Expo Hat Yai: July 7-9, Hat Yai Hall, Central Festival Hat Yai

3. Money Expo Nakhon Ratchasima: August 18-20, EMC Hall, The Mall Korat

4. Money Expo Rayong: September 8-10, Central Plaza Rayong

5. Money Expo Udon Thani: October 6-8, Udon Hall, Central Udon Thani

6. Money Expo Chiang Mai: November 10-12, Chiang Mai Hall, Central Chiang Mai Airport

7. Money Expo Bangkok: December 14-17, Exhibition Hall 4, Queen Sirikit National Convention Centre

Related Stories: 

• Kiatnakin Phatra flags export slump as a drag on Thai economic recovery in 2023
• CLMV, Mideast markets, future products crucial to business survival in 2023 slowdown: EXIM Thailand
• Krungsri bank to raise lending rate by 0.40%

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https://www.nationthailand.com/business/banking-finance/40024507

Kiatnakin Phatra flags export slump as a drag on Thai economic recovery in 2023

TUESDAY, JANUARY 31, 2023

Nongluck Ajanapanya

Kiatnakin Phatra Financial Group (KKP) has suggested that Thailand address an unequal economic recovery this year, as the tourism industry is recovering while exports are falling.

KKP Research chief economist Pipat Luengnaruemitchai issued the warning while releasing the company’s earnings report on Tuesday. 

He explained the overview of the country’s economy under the topic “The hope for the Thai economy amidst the global economic storm”.

He said that there are hopes for the Thai economy to recover this year as tourism is picking up and will do even better because China has reopened its borders earlier than expected.

However, with the global economy expected to grow at a slower pace than the previous year and many large business sectors at risk of recession, Thailand’s exports, another core engine driving Thai growth, are expected to slow further from the end of last year.

Exports are expected to fall in the first half of 2023 before recovering in the second half as China’s economy improves.

According to Pipat, exports will be down 1.8% from the previous year.

Pipat Luengnaruemitchai

Overall, KKP Research has raised its forecast for Thailand’s economic growth this year from 2.8% to 3.6%. However, economic risks such as the impact of the global slowdown, high inflation, central bank policy, the uncertainty of Covid-19, and geopolitical tensions must be closely monitored.

Meanwhile, the upcoming Thai election must be closely monitored too because it may introduce another variable that affects the Thai economy.

Aphinant Klewpatinond, KKP’s chief executive officer, stated that the company plans to pursue a prudent business growth strategy this year while expanding its potential customer base in response to high inflation, rising interest rates, and a global economic slowdown or recession.

He said that the challenges would have a wide-ranging impact on all customer groups and credit quality.

KKP also intends to increase Group synergy through cross-selling while leveraging its savings and investment digital platforms, such as Dime and Edge.

“At present, the Dime application has over 100,000 users, and KKP plans to collaborate with partners to grow a customer base and develop application features to better meet the needs of diverse customer groups,” he said.

Aphinant strongly believed that with a prudent strategy, the company could continue to grow smoothly.

According to its most recent quarterly earnings reports, KKP’s net profit in 2022 will be 7.602 billion baht, up 20.3% from the previous year.

The rise was primarily driven by commercial banking, which saw loan growth across all segments reach 21.4%. The capital market continued to generate good revenue, and the brokerage business maintained its top market share.

KKP’s fund management revenue increased as well, while investment business grew significantly due to equity and derivative trading in volatile market conditions.

Investment banking revenue was satisfactory, owing largely to transactions in the second half of 2022, he said, while wealth management asset under advice (AUA) was roughly 700 billion baht.

(From left) Aphinant Klewpatinond, Philip Chen Chong Tan, and Preecha Techarungchaikul

KKP’s president, Philip Chen Chong Tan, added that the bank would continue to focus on smart growth in potential customer groups and collateralised loans like auto hire-purchase and home loans.

KKP’s loan portfolio increased by 21.4% in 2022, resulting in higher interest and fee income.

In terms of this year’s plans, KKP’s president intends to expand markets for the recently launched “Rod Riak Ngern” (car for cash) and leverage banking digital channels, such as KKP Mobile and Edge, to connect banking services to KKP’s investment services.

Kiatnakin Phatra Financial Group (KKP) was formed by the merger of Kiatnakin Phatra Bank’s commercial bank and Kiatnakin Phatra Securities’ capital market business.

The group provides clients with financial resources, products, and services, such as corporate loans, real estate loans, SME loans, and retail loans such as car loans, housing loans, personal loans, investment banking, securities brokerage, wealth management, direct investment, and asset management.

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https://www.nationthailand.com/business/banking-finance/40023773

Baht weakens against dollar on Friday but experts see upswing ahead

FRIDAY, JANUARY 06, 2023

The baht opened at 34.03 to the US dollar on Friday, weakening from Thursday’s close of 33.87.

The currency will likely move between 33.90 and 34.20 against the greenback during the day and between 34.00 and 34.25 in the short term, Krungthai market strategist Poon Panichpibool said.

He said the baht weakened due to the strengthening dollar and falling gold price. He added that the Thai currency could face further pressure from positive US economic data such as non-farm payrolls, wage growth and the Purchasing Managers’ Index.

However, he did not expect the baht to weaken further as exporters are waiting to sell dollars. Also, foreign investors expect the baht may strengthen.

Poon said the baht could rise to 33.50 to the dollar on the return of Chinese tourists and gold sales.

He also advised investors to use strategies to prevent risk from currency exchange volatility.

Kobsit Silpachai, Kasikornbank’s head of capital market research, expects the baht to strengthen in the first quarter as tourism recovers before weakening in the second quarter due to dividend payments and foreign fund outflows.

Koraphat Vorachet, director of investment research and investor services at Capital Nomura Securities, said stocks in airlines, power plants and industrial estates would benefit from the strengthening baht as a large proportion of their debt is in foreign currency.

Related stories:

• Baht steady against dollar but expert warns of year-end volatility
• Baht weakens against dollar as expert warns of volatility from US inflation data
• Baht up slightly against dollar but all eyes on Thai export data

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https://www.nationthailand.com/business/banking-finance/40023604

Krungsri bank to raise lending rate by 0.40%

FRIDAY, DECEMBER 30, 2022

Beginning on January 3 of the next year, Krungsri bank will increase its lending rates by 0.40% per annum, said Chief Strategy Officer Pairote Cheunkrut on Friday (December 30).

The decision about the adjustment was made following a gradual economic recovery in Thailand and an increase in interest rates, added Pairote. 

The rates are changing as follows:

–    Minimum Loan Rate (MLR) is increased by 0.40% to 6.48%
–    Minimum Overdraft Rate (MOR) is increased by 0.40% to 6.725%
–    Minimum Retail Rate (MRR) is increased by 0.40% to 6.65%
 

He added that Since Thailand’s economy continues its gradual recovery, the decision to raise rates has been made following the current economic climate, rising global interest rates, and the change in contributions to the Financial Institution Development Fund (FIDF) at a normal rate of 0.46%. 

Factors namely market conditions and economic factors were taken into account before making this decision. The Bank remains committed to offering timely and appropriate support to meet the needs of customers, aligning with the Thai Bankers’ Association (TBA)‘s practice, he added.

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https://www.nationthailand.com/business/banking-finance/40023579

KBank Phnom Penh Branch wins ‘HR Asia Best Companies to Work for in Asia 2022’ award

FRIDAY, DECEMBER 30, 2022

KASIKORNBANK (KBank) Phnom Penh Branch general manager Ritthiwut Watthanachai represented the leading financial institution as it received the HR Asia Best Companies to Work for in Asia 2022 (Cambodia Edition) award.

The awards, which recognise organisations gaining a comparative advantage through their people development efforts, are organised by HR Asia magazine – Asia’s leading media for HR professionals.

KBank Phnom Penh Branch was honoured for its excellent human resource management, which focuses on the creation of a learning environment in the workplace, as well as the promotion of employee development and a spirit of teamwork for the sustainable career growth of all staff.

KBank expanded its service provision in 2017 by establishing the Phnom Penh Branch in the Cambodian capital.

In the more than five years since its inauguration, the KBank Phnom Penh Branch has adopted an operational format in alignment with the required international banking standards, with the aim of meeting the needs of local customers and benefiting Cambodia’s financial sector.

Despite the Covid-19 pandemic and economic slowdown, a quality team has enabled KBank to overcome the obstacles and challenges of recent years.

KBank has always adhered to the principles of operations based on the “World of Borderless Growth” through opportunities to learn and develop its capabilities, from hands-on operations, creating options for the path towards growth, based on its own needs, and achieving synchronised growth with a team that has the full potential to reach a common goal.

The Phnom Penh Post

Asia News Network

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https://www.nationthailand.com/blogs/business/banking-finance/40023528

CLMV, Mideast markets, future products crucial to business survival in 2023 slowdown: EXIM Thailand

WEDNESDAY, DECEMBER 28, 2022

EXIM Thailand has advised Thai businesses to stay adaptable penetrate CLMV and Middle East markets – which have strong prospects and demand for Thai goods – in order to survive and thrive in 2023.

The export-import bank said companies should develop products in response to global trends of the new era, leveraging EXIM Thailand and public sector mechanisms as tools for business development toward the Next Normal world. This would respond to expected 3.5% expansion of the Thai economy in the new year, against decelerating global economic growth of 2.7%, driven by recovery of Thai tourism and private sector consumption, while exports could slow down in line with global economic outlook, it said.

Rak Vorrakitpokatorn, President of Export-Import Bank of Thailand, revealed that the Thai economy in 2023 tends to continue to grow by around 3.5% against the slowing global economic growth predicted by the International Monetary Fund (IMF) to 2.7%, the lowest in 21 years (excluding the years with crisis eruption).

Thailand is among only a few countries whose economic growth is on an upward trend compared to the foregoing year fueled mainly by the clearly improving tourism with foreign tourist inflows expected at more than 20 million, doubling that of the previous year, along with support from domestic demand, particularly private sector consumption which has expanded on the back of the increased farm income and improving employment in service sectors in line with tourism recovery.  

Meanwhile, export which has for the past 2 years been the main engine in propelling the Thai economy has tended to slow down as reflected by EXIM Index which has consistently declined and hit the lowest level in 8 quarters.

Thai export in 2023 is forecast to expand by only 1-2%, decelerating from 7-8% in 2022, pressured by slowing global demand, particularly from Thailand’s major trade counterparts like the US and Europe which are at risk of falling deeper in economic recession, coupled with the slower than expected Chinese economic recovery.

Furthermore, global supply chain disruption, though having relieved to some extent, still carries high uncertainties, and the prevailing foreign exchange fluctuations as well as geopolitical tensions could inevitably dampen Thai export looking forward.

EXIM Thailand President said that there are certain ways for Thai entrepreneurs to make it through the global economic slowdown and capture opportunities in the markets where there is still room for Thai goods, comprising:

1. Penetration of the CLMV (Cambodia, Lao PDR, Myanmar and Vietnam) and the Middle East markets, such as Saudi Arabia. In the first 10 months of 2022, Thai export to such markets recorded a growth of over 15% and 26% respectively.

2. Export of goods that would fill upmarket gaps, such as tourism-related goods like foods, fruits, cosmetics, home appliances, etc., and products that cater to conflicting countries in international politics, such as the export of Thai electrical appliances in substitution for Chinese ones in the US market, and the increasing relocation of production bases from China to Thailand for several industries, e.g. electric vehicles and electronics products. With such developments, Thai entrepreneurs should also be enabled to make a presence in the supply chains of the future.

3. Export of goods responsive to the trends of new generation consumers, such as wellness and eco trends which have become the New World Order.    

Rak further said that EXIM Thailand is fully equipped to work alongside the public and private sectors to assist Thai entrepreneurs including individuals in doing business, capturing upcoming opportunities to drive business development in linkage with global supply chains, and developing strategies and product lines to cater to the demand of new generation consumers who support businesses conducive to sustainability in economic, social and environmental dimensions, and better quality of life and health of consumers toward balanced and sustainable development of all sectors.  

“The year 2023 could still be embattled with numerous risks but fresh opportunities are poised to emerge in the markets where Thai goods could access with a competitive edge. EXIM Thailand is well-positioned to give advice and offer full-fledged financial solutions to strengthen Thai business sectors from individuals to community enterprises and business entities of all levels who aspire to expand their businesses beyond Thailand,”.

In view of this, it is easier today to do business on various online trade platforms. What really matters is business operators’ capability to adapt to and catch up with global advancement making the best use of mechanisms and supports from the public sector, including EXIM Thailand.

” We are committed to performing our role as Thailand Development Bank which dares to take ‘One Step Ahead for All Development’ to transform Thailand and the world at large into a better place of tomorrow for all,” added Rak.    

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https://www.nationthailand.com/business/banking-finance/40023396

Siam Commercial Bank wins two world-class awards, named Best Bank of the Year for Asia-Pacific region and for Thailand

FRIDAY, DECEMBER 23, 2022

Siam Commercial Bank (SCB) has once again proven its superiority by being selected for prestigious Best Bank of The Year in the Asia-Pacific region and Best Bank of The Year in Thailand 2022 awards for the third time in the last five years.

The  Bank of the Year 2022 awards and ceremony were organized by The Banker, a provider of economic and financial intelligence for the global financial sector and a member of the world’s leading media outlet The Financial Times.  The two awards demonstrate the Bank’s resolve to turn its traditional company into a financial technology firm by implementing a major organizational restructure that has resulted in dramatic changes to working styles and business practices. In the past year, the success of the transformation has begun to manifest itself in the form of higher earnings, a better capital position, decreased operating expenses, and enhanced operational efficiency.

In sharing the good news, Siam Commercial Bank Chief Executive Officer Kris Chantanotoke revealed, “Amid the influx of new digital technology that has disrupted traditional banking operations and completely changed the landscape and competitive context of the banking business, SCB foresaw the need for its current ongoing major organization restructuring to support our banking business, both now and in the future. The Bank must be mindful of a variety of challenges, particularly non-bank competition. Success will depend on how well the business portfolio manages to address the many issues and requirements of the target market. Increasing the use of digital technology to back digital sales, raising revenue from strategic partners, decreasing the cost-to-income ratio, and keeping a solid capital basis are all part of the plan.”

“The Bank recognizes that a major reorganization necessitates the cooperation and resolve of all employees to adapt their mindsets and attitudes in the best way possible.  It will involve learning to use modern technology, adjusting approaches, and increasing productivity through the use of more technology, with the belief that the cooperation of employees will allow us to maintain standards and provide the best services and experience to customers who have always placed their trust in the Bank’s services. Siam Commercial Bank has every reason to be proud to have won these prestigious accolades.”

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https://www.nationthailand.com/blogs/business/banking-finance/40023379

Revolutionizing financial reporting in the digital age

FRIDAY, DECEMBER 23, 2022

Finance and Accounting team, if you ever happened to discuss what they have been suffering from their work so far, one of the most frequently mentioned issues will certainly include a painful report production process – by Vichai Suknaibaiboon, Advisory Partner at Deloitte Thailand.

Repeatedly, month after month, to serve such standards and business and executive requirements, the FA people need to dedicate their time and motivation in preparing numerous spreadsheets and presentations with numbers, charts, and relevant footnotes and narratives. The process involves efforts of data gathering, manipulation, and spreadsheet gymnastics, which can consume days to weeks to produce the usable outcomes. Based on the survey of 600 global finance leaders conducted by Deloitte, it was found that companies surveyed spent 48% of their time creating and updating reports, whilst they spent only 18% of their time interacting and communicating with the business perspective (See Figure 1).

More than ever, especially after the COVID-19 pandemic, businesses currently require greater support from holistic reporting in decision-making process to strengthen themselves or at least survive the upcoming crisis. Though many companies have strived to reduce time in generating reports and enhance ability to get insights more quickly by standardizing reports into those ones which are necessarily required, there is still a huge room for improvement in response to the dynamically changing business requirements. We can see that the trend is shifting from periodic reporting-monthly, quarterly, and annually to a more real-time-insights manner for off-cycle reporting. Further transformation entails the interaction between working people and reported information which will replace static data merely displayed in the system or printed on paper. Underlying these mentioned characteristics, the key driver for changes lies on emerging intelligent technologies which will not only remove laborious work but also improve the user experience. 

Embracing digital tools could have been one among alternatives for FA people to reshape their work life by speeding up report production process. Little by little, some companies have started implementing such tools as point or end-to-end solutions, while many are still hesitating to transform themselves. Yet, it is quite surprising to learn that many organizations are still relying on traditional ways to compile data from sources and produce into reports despite the prevalent handful technologies, such as automation, advanced analytics, machine learning, presence nowadays. Perhaps one of the factors that delay the decision to do so is just basically that the management do not know how to push the start button. Here are some tips we would like to share:

Organize your data. Because your report quality will certainly depend on the quality of your data, somehow you will need to redesign the way to manage your finance and enterprise data prior to the adoption of those digital reporting tools. This could involve implementing data platforms that can develop gradually to support structured and unstructured data or cleansing your data to avoid ‘Garbage-in, Garbage-out’. 

Gain buy-in from the C-Suite. We know that the first mover role here should belong to CFO since the issue was raised from FA side. Nonetheless, it is also crucial for the CFO to bring these ideas to the entire C – suite. If other leaders support technological innovation in finance, it can also help the business to further adopt the innovation and apply to other functional processes to make the most of their capabilities.

Focus on the user experience. Early in your journey, explore “what-if” questions with key users. Ask them how they might use information differently if their reports were more intuitive, more visual, and more proactive. Build in formal and informal mechanisms for generating feedback. These actions make sure you put technologies in the right place and right way.

Take small steps. Just try applying solutions to specific segments or functions first. You do not want to make a huge investment at a time to find it hurts the most when things are not going well as you have dreamt of. Look for high-impact use cases to build a base of advocates. For many firms, sales reports can be a good choice to start with. Make sure you pilot with a range of potential users who will become your champions. Then you can span the full range of usage among those who will eventually adopt the technology.

Reassure your people. Workforce disruption is inevitable for companies trying to adopt automation or digital tools. Since some more routine and laborious tasks may be obsolete when new technologies take place, make sure you have plan to build new talents and skills for your people to cope with the changes. Work with employees to make the most of their human skills, empowering them in new roles that rely on high-level analysis, relationship-building, and creativity.

Reimagine your people. Start thinking about your people in future conditions. What types of skillsets you will need? Be aware that, with the handful digital tools armed in your company, the time allocation of the finance workforce will shift toward analysis, prediction, and decision support. Thus, in collaboration with your HR team, make sure they understand this so that you will get the right persons at hand.

Finally, let us imagine how life would be much easier if there is a personal assistant helping you gathering data and composing the first draft of all reports, or the chatbots that can retrieve insights you need to know without diving in all sources of data by yourself. Now you can focus on the value-added activities.

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https://www.nationthailand.com/business/banking-finance/40023285

InnovestX reveals investment strategies for 2023 with SET Index targeted at 1,750 points

TUESDAY, DECEMBER 20, 2022

InnovestX believes that economic activity will continue to deteriorate in 2023 due to a gradual increase in interest rates, which increases the likelihood of a recession in developed countries such as the United States and Europe. The company anticipates that the Federal Reserve will slash interest rates in 2023 as demand is expected to decline, resulting in a dollar depreciation.

This will boost emerging markets such as the Thai stock exchange, which is anticipated to profit from capital inflows. In addition, the Thai economy is still on the path to recovery from domestic consumption with economic stimulus measures as a supporting factor, as well as positive expectations for China’s reopening in 2Q23. However, InnovestX is cautious about economic growth and earnings prospects in 2023, as well as rising risks to financial stability. The company suggests investing in top equities in 1Q23 which will gain from China’s reopening and the reviving Thai economy, namely AOT, BBL, BCP, CPALL, and MINT. 

Innovest X Securities Co., Ltd. Research Group Managing Director Sukit Udomsirikul, said that during the transition period between 2022 and 2023, the world economy will exhibit three traits. To begin with, global economic growth will slow down dramatically, and the economies of developed and emerging markets will evolve differently, with the former potentially experiencing severe stagflation or at least a moderate recession. However, there is less likelihood of a severe recession in EM economies, but growth will decelerate. Second, global inflation is predicted to peak, especially in the US and EM nations, and to decline from a high base in 2023 as global demand decreases as a result of the economic slowdown. Third, Asian countries, including Thailand, are expected to continue raising their own interest rates, which means that the policy interest rate is already too high to accommodate heating inflation. Accordingly, we forecast a fundamentally driven SET Index of 1,750 points for the first quarter of 2023, with significant buying points in the zone of 1,500-1,600.
 

Thai markets will react favorably to China’s policy easing in 2Q23, when it is anticipated that the country will reopen because Chinese tourists account for the majority of Thailand’s tourism income and help drive net foreign inflows. Due to the ongoing energy crises and stricter monetary policy, the Eurozone will face stagflation in 2023, with economic activity declining. It is expected that inflation will continue to be over the target rate throughout 2022 and 2023. Inflationary pressures in the Eurozone, however, are likely to rise at a faster rate than previously anticipated. Exports, investments, and government expenditures will all likely slowdown in 2023, dragging down the Thai economy relative to 2022.  There will be some cushioning from the worldwide economic recession thanks to the strong performance of the tourism, service, and domestic consumption sectors.  

Thailand’s GDP growth will peak in the first quarter, at roughly 4%, before decelerating in the second half of the year and ending almost at 2% in 4Q23 due to 3 main reasons.  First, exports will decrease as the global economy slows even further in the second half of the year.  Second, while private consumption will play a significant role in propelling the economy forward, other factors like private investment and government spending will decline, both for consumption and investment.  This is because the worldwide economic downturn and the slow pace of government projects’ disbursement.  Third, it is projected that the tourism sector will be a major engine of economic growth, with between 21 to 25 million foreign tourists visiting Thailand, the majority of whom will remain on short haul rather than long-haul trips, generating less revenue for the nation.

Investment strategy: Under the pressure of prolonged tight financial conditions in 1Q23, risks associated with global recession, declining earnings, and financial stability are growing. The economy is still showing indications of slowing down.  However, given the robustness of the U.S. economy and greater risk aversion, the dollar will continue to appreciate before reaching its top. By the end of 1Q23 to the beginning of 2Q23, the economy will likely have stabilized.  In light of China’s reopening and robust domestic demands, we see opportunities to increase our position. InnovestX recommends stocks with healthy balance sheets and cash flow, profiting from China’s reopening, with increasing and recovering earnings and high growth potential. AOT, BBL, BCP, CPALL, and MINT are the top picks for 1Q23. 
 
Summary of investment issues of individual stocks: 

• AOT: It is anticipated that the company will gain from China’s reopening and government tourism incentives, which will fuel domestic market growth. In 2023, the company’s earnings outlook will experience a significant turnaround.
• BBL: With a planned rate hike from 1.25% to 2% in 2023, the Thai economy is poised to resume its recovery. The banking industry stands to gain from a declining US dollar because of the resulting changes in capital flows.
• BCP: With the reopening of China’s markets, an uptick in demand is anticipated, which is projected to drive up commodity prices. Furthermore, it is a passive company which pays out solid dividends, both of which assist in cushioning the blow of market fluctuations.
• CPALL: Domestic consumption will expand at a rate far above market predictions. Sales will continue to improve thanks to government economic stimulus measures, and the company will see more growth during the 2023 election.
• MINT: The company is anticipated benefitting from China’s reopening, reduced energy costs in Europe, and a rebounding food market, aided by government economic stimulus initiatives. In addition, MINT’s stock valuation is 15-20% below those of its peers.