SET Index Resilience Forecasted Despite Southern Floods, Supported by Rate Cut Hopes
Mr. Koraphat Vorachet, Assistant Director and Division Head of Research at Krungsri Securities (KSS), recently analyzed the market outlook for the “Kaohoon” program, noting that while many Asian markets are trending toward negative territory due to specific domestic factors, the Thai market, specifically the SET Index, exhibits a notable resilience. The immediate challenge for Thailand’s Economy in the fourth quarter is the severe flood crisis currently affecting the southern region, which is expected to negatively weigh on the nation’s overall economic growth.
However, KSS research suggests that water levels in several affected areas are beginning to recede, providing early indicators that the worst of the disaster may have already passed. Crucially, the securities firm established a base case scenario which estimates that if the situation can be stabilized and a comprehensive recovery achieved within a period of approximately 25 days, the total value of the economic damage inflicted by the floods could be successfully limited to an estimated THB 19.7 billion.
Mr. Koraphat emphasized that this flood incident is anticipated to have a comparatively limited impact on the overall Stock Exchange of Thailand (SET) Index, contrasting sharply with past crises. He recalled the severe 2011 flood crisis, which saw the SET Index plummet dramatically from around 1,100 points to approximately 850 points, requiring a long four months for the market to fully recover to its pre-incident valuation.
In the current context, the recovery time is forecast to be significantly shorter, likely taking only a few weeks, primarily because the SET Index is currently supported by strong positive sentiment emanating from major upcoming Finance events, specifically the Federal Reserve (Fed) meeting and the Monetary Policy Committee (MPC) meeting, both scheduled for December.
Foreign Investment and Monetary Policy Shifts Drive Positive Market Sentiment
The anticipated short recovery window for the SET Index is strongly supported by a confluence of positive market drivers, particularly the expectations surrounding monetary policy shifts in both the United States and Thailand, which heavily influence Investment decisions. According to the Bank of Thailand (BOT)’s third quarter report, the nation’s domestic demand growth unexpectedly failed to meet earlier estimates, a key indicator that significantly increases the probability that the central bank may implement a rate cut in the near future.
This growing likelihood of a domestic rate cut is viewed by KSS as a substantial positive sentiment driver for the SET, as lower interest rates typically enhance equity valuations and reduce the cost of capital for businesses. This positive outlook has already been reflected in market behavior, with foreign investors consistently engaging in net buying of Thai stocks for a considerable period of time.
This sustained inflow of foreign capital provides a robust underpinning to the SET Index, offering a stable floor and mitigating localized negative news. The upcoming December meetings, including the crucial decisions from the US Fed, are also viewed as critical.
Should the Fed signal a less hawkish stance or even hint at future rate reductions, it would further reinforce global risk appetite and encourage greater capital flows toward emerging Asian markets, including the SET. Mr. Koraphat highlighted that once the market determines the flood crisis has passed its peak and the immediate recovery phase begins, investors are expected to swiftly adopt a recovery-oriented Investment strategy.
This strategy will heavily focus on sectors positioned to benefit directly from reconstruction and renovation efforts, essentially pivoting market focus toward a post-crisis Economy rebound.
Strategic Stock Picks: Focusing on Recovery and Value in the SET
In anticipating the post-flood recovery phase, Mr. Koraphat offered specific stock recommendations, guiding investors toward sectors that are poised for strong performance as reconstruction spending accelerates across the southern region. The primary focus of the recovery strategy is expected to center on the decoration and home improvement sector.
Companies within this space, which supply the essential materials for rebuilding and repairing damaged properties, are expected to see a significant surge in demand. Highly recommended stocks in this segment include Home Product Center PCL (SET: HMPRO), DOHOME PCL (SET: DOHOME), SCG Decor PCL (SET: SCGD), and notably, Siam Global House PCL (SET: GLOBAL), which is often seen as a bellwether for rural and provincial home building activity and is poised to benefit substantially from the immediate need for repairs.
Furthermore, KSS advised investors to diligently monitor the performance and stock movement of several other key sectors expected to thrive in the rebounding Economy, including retail, consumer finance, hotel, and hire-purchase businesses. Beyond the recovery plays, KSS also provided recommendations for specific high-conviction stocks based on broader Finance and Investment themes.
The securities firm strongly recommends Gulf Development PCL (SET: GULF), as the company stands to significantly benefit from the increasing likelihood of a Fed rate cut in December, which typically favors large-cap, capital-intensive infrastructure and energy players. Additionally, Krungthai Bank PCL (SET: KTB) is viewed by the securities company as a strong value play, with its stock being further supported by positive market news regarding the bank’s potential share repurchase program, demonstrating management confidence and providing a direct boost to shareholder returns within the SET.
Regional Market Impact: Thailand’s Role as a Finance Safe Haven Amid ASEAN Volatility
The forecasted resilience of the SET Index, particularly its quick recovery timeline, solidifies Thailand’s critical role as a relative Finance safe haven within the Southeast Asian region, a status that is increasingly vital amid heightened global and domestic volatility. While neighboring ASEAN Economy peers like Vietnam and Indonesia are grappling with either higher inflation expectations or more aggressive rate hike cycles, the credible prospect of a BOT rate cut positions Thai assets favorably, creating an attractive yield-carry trade for short-term speculative foreign Investment.
This differential in monetary policy creates a temporary but powerful capital magnet, drawing funds that might otherwise be allocated to markets facing tighter financial conditions. Furthermore, the anticipated flood recovery spending, estimated at THB 19.7 billion, introduces a significant, albeit reactive, fiscal stimulus into the system, generating guaranteed Business volume for listed companies in the construction and materials sector.
The structural Investment thesis, which favors large-cap stocks like GULF and KTB due to lower long-term borrowing costs, transcends local headlines and aligns with regional institutional mandates seeking exposure to stable, regulated sectors in a high-growth region. This makes the SET not just a place for domestic recovery plays, but a strategic component in a diversified regional portfolio, valued for its monetary policy flexibility and its strong representation of essential, large-scale infrastructure assets.
