Thai stocks turning attractive as House Speaker appointment dampens political risk: Nomura
THAI equities appear to offer a more attractive risk-reward proposition for investors taking a medium-term view as the kingdom’s political environment improves, said Nomura’s market research team in a report on Wednesday (Jul 5).
This comes after Wan Muhamad Noor Matha of Thailand’s Prachachart Party – one of the smaller parties in an eight-party coalition attempting to form a new government – was was appointed to be the next Speaker of the House.
His selection as the sole nominee is regarded as a compromise between the two biggest parties in the coalition – the Move Forward and Pheu Thai parties – and could reduce political uncertainties and raise the chances of a more stable, civilian-led government, said Nomura.
“(The) House Speaker’s selection reduces political risk somewhat,” he added. “While we still expect lingering political uncertainty until a new government is formed, nonetheless, we see this event as incrementally positive for Thai equities.”
With Thai equities recently underperforming in the wake of political uncertainties, Nomura’s team now anticipates some buying opportunities, especially for investors willing to take a more medium-term view.
“Since May 10 – days before the May 14 elections – the MSCI Thailand (USD) has underperformed the MSCI Asia-ex Japan and MSCI Asean by around 10 per cent and 2 per cent respectively, while the Thai baht has declined by around 4 per cent during the same time frame,” the team noted.
As the political situation stabilises, however, Nomura expects the recovery of the tourism industry in Thailand to act as a key driver for its economic growth, as well as a buffer to offset the weaknesses in other sectors such as exports and agriculture.
Assuming no street protests in the near term, the research team recommends a focus on Thai stocks geared towards the consumer, tourism and other reopening-related sectors.
Its preferred companies include Central Pattana, CP All, Airports of Thailand and Central Retail.
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