Limited upside ahead for rising SET index

Electronics, tourism lead monthly gains

Stock market analysts predict Thailand's benchmark index will continue its rise despite limited upside, saying Thai equities have become increasingly attractive to foreign investors due to deeply discounted valuations and improving earnings prospects.

Arapat Sangkharat, chief executive of Maybank Securities (Thailand), said Thai equities have reached valuation levels that are difficult for global investors to ignore, prompting renewed foreign fund inflows and speculative buying.

According to Maybank's research team, the Stock Exchange of Thailand (SET) index gained 5% in May, driven largely by the global artificial intelligence boom, which lifted the electronics sector by 12.2%, making it a key contributor to the market's advance. Construction stocks surged 14.7%, while tourism-related shares gained 7.93%.

The Thai index soared to a three-year high on Thursday, surpassing 1,600 points as Asian bourses declined amid renewed fighting between the US and Iran, unsettling investors and triggering a broader shift towards safer assets.

Despite the improving outlook, Maybank expects the SET index to trade within a range of 1,540-1,630 points in June, warning that upside potential is becoming more limited. The brokerage believes future gains will be driven by sector rotation rather than a broad-based market rally.

Mr Arapat cautioned that investors should remain mindful of risks emerging next year, particularly fiscal constraints and elevated public debt levels, which could limit the government's ability to introduce additional economic stimulus measures.

"Long-term market growth requires clear economic catalysts rather than relying solely on short-term sentiment driven by global events," he said.

Investors are advised to avoid emotion-driven trading and focus on disciplined, fundamentally grounded investment strategies. They should monitor upcoming policy decisions from the Federal Reserve, European Central Bank and Bank of Japan, which could trigger a rebound in bond yields, noted the brokerage.

VALUE, DIVIDEND STOCKS

Mr Arapat highlighted cheap, fundamentally sound stocks as the most promising opportunities, particularly value plays that have yet to fully recover from previous market weakness.

For example, the aviation sector could benefit from a continued tourism recovery, while high-dividend companies remain attractive, with some industries offering dividend yields of up to 8% annually. Consumer finance, power, healthcare and tourism stocks are expected to gain momentum from the market surge, he said.

Mr Arapat recommended selective investments in companies with strong earnings per share growth, noting that stock selection is becoming increasingly important as performance diverges across sectors.

"Investors should prioritise fundamentals over momentum and seek undervalued companies whose market prices have not yet fully reflected their intrinsic value," he said.

MUTED IMPACT

Piriyapon Kongvanich, head of equity research at Bualuang Securities (BLS), said the US's proposed 12.5% tariff under Section 301 on imports from countries deemed ineffective in preventing imports linked to forced labour is unlikely to significantly affect the Thai bourse. Products expected to receive exemptions include integrated circuits, minerals and pharmaceuticals, noted the brokerage.

Excluding electronics exporters, revenue exposure to the US market among listed companies under BLS's coverage accounts for less than 0.5% of the SET's aggregate revenue. However, export-oriented firms could face greater pressure, including i-Tail Corporation (ITC), Thai Union Group (TU), Sri Trang Gloves (Thailand) (STGT), and Sri Trang Agro-Industry (STA).

BLS views any market weakness resulting from tariff concerns as a buying opportunity and recommends fundamentally strong companies with solid earnings growth and attractive dividends, including Gulf Development (GULF), WHA Utilities and Power (WHAUP), Krung Thai Bank (KTB), SCB X (SCB), and Moshi Moshi Retail Corporation (MOSHI).