Is the worst over for Thailand's stock market?


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By Beansprout • 31 Jan 2024 • 0 min read

Thailand's stock market was one of the worst performers in the region last year. We find out if the improving economic outlook might lead to a recovery for the country's blue chip stocks.

thailand stock market outlook 2024
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What happened?

The Thai stock market was one of the worst performers in the region last year. 

Thailand’s SET index, which is the key benchmark for blue chip stocks in Thailand, fell by 15% in 2023. 

This represents a steeper fall compared to stocks in Hong Kong, with the Hang Seng Index declining by 14%.

The performance of the Thai stock market last year would pale even further in comparison compared to US stocks, which gained 24%, as well as Singapore stocks, which were flat in 2023.

thailand stock market underperformed 2023
Source: Bloomberg

The weakness in the Thai stock market was driven by political uncertainty with the uncertain outcome of the elections, as well as weaker than expected economic growth. 

In addition, there was rising interest rates in the US led the capital outflows from Thailand. 

Against this backdrop, will the Thai stock market perform better in 2024? Let us dig deeper to find out. 

What’s the outlook for the Thai economy?

Thailand’s economic growth is expected to accelerate to 2.8% in 2024 from 2.5% in 2023, according to Thailand’s Ministry of Finance.

The recovery is expected to be driven by an improvement in prospects for the tourism sector, as well as rising exports and consumer spending. 

thailand economic growth expected to grow 2024
Source: Thailand Ministry of Finance


In addition, Thailand’s planned ‘digital wallet’ programme could potentially add another 0.5-1.0% to its growth over 2024 and 2025 if implemented. 

The planned digital wallet programme would transfer 10,000 baht (S$378) each to 50 million Thais via a mobile app to spend in their local communities.  

Also, inflation in Thailand could ease to 1.1% in 2024 with lower energy prices.

With the US Fed projected to cut interest rates this year, there may be some relief for the Thai Baht. 

What are some key themes to look out for?

#1 – Beneficiaries of stimulus measures

Consumption spending in Thailand could receive a boost if planned stimulus measures were implemented. 

Earlier, Thailand’s new Prime Minister Srettha Thavisin had argued that stimulus measures are needed to revive sluggish growth.

In particular, the ‘digital wallet’ programme could provide further upside to Thailand’s economic growth, with total spending expected to be close to 2.7% of Thailand’s GDP.

Initially planned to be launched in February, the ‘digital wallet’ programme has been delayed due to questions raised on how it will be funded. 

However, consumer spending could be lifted in the near-term once the ‘digital wallet’ is launched, benefitting Thai consumer companies. 

Apart from the digital wallet, Thailand’s government has also approved tax cuts on alcoholic beverages and entertainment venues with the aim of boosting tourism.

To ride on the theme of government stimulus to consumer spending, investors can look at CP All (SGX: TCPD), which is the operator of Thailand’s largest convenience store chain through its network of 7-Eleven stores. 

With a recovery in consumer spending, CP All reported a 6.0% increase in revenue in the third quarter of 2023 compared to the previous year. CP All has also continued on its store expansion, opening another 553 stores in the first nine months of 2023. 

Thai Beverage (SGX: Y92) may also see higher alcoholic beverage sales with the approved tax cuts announced.

consumer sentiment reached multi-year high dec 2023
Source: University of the Thai Chamber of Commerce

#2 – Tourism recovery 

Tourist arrivals into Thailand have recovered in 2023, following the re-opening of borders. 

There were close to 25 million international tourist arrivals to Thailand from January to November 2023, representing about 70% of the pre-pandemic levels. 

More importantly, it is worth noting that the number of tourists has improved through the year.

From about 58% of pre-pandemic levels in January, the total number of international tourist arrivals has reached 78% of the pre-pandemic levels in November. 

This would bring the total tourist arrivals in Thailand to 28 million in 2023, about 30% below the 40 million tourist arrivals in 2019.

thailand tourism to recover in 2024
Source: Bank of Thailand

The key reason tourist arrivals have yet to recover to pre-pandemic levels is due to a decline in Chinese tourists.

There were just 3.1 million tourist arrivals from China from January to November 2023, representing about 30% of the pre-pandemic levels. Clearly, China’s slowing economy and preference amongst Chinese tourists to travel locally has led to a reduction in outbound travel. 

However, there is scope for the number of Chinese tourists in Thailand to rise further following the announcement of the visa scheme in January 2024.

As a result, the Bank of Thailand expects tourist arrivals to recover further to 33.5 million in 2024 from 28 million in 2023. 

The Tourism Authority of Thailand has also set a target to grow tourism revenue to 3.5 trillion baht in 2024, of which 2.5 billion baht of revenue is expected to come from international tourists.

To ride on the theme of a recovery in the tourism sector, investors can look at Airports of Thailand (SGX: TATD), which is leveraged to higher tourist arrivals into Thailand as the operator of six major airports in Thailand.  

Earlier, Airports of Thailand AOT reported a 19% increase in revenue in the fourth quarter of fiscal year 2023 compared to the previous quarter, driven by a recovery in tourist arrivals in Thailand. 

#3 – Moving towards green energy

Thailand has a high dependency on energy imports, and any spike in oil prices may lead to higher than expected inflation.

This means that a move towards green energy could help to strengthen Thailand’s energy security and drive sustainable growth. 

As a result, Thailand has set a clear goal of achieving net-zero emissions by 2065, as well as a 30% reduction in its emissions by 2030. 

Thailand also aims to target having 20% of its power generation coming from renewable energy sources by 2036. 

The country’s Climate Change Act is being drafted and is expected to launch in 2024. 

These ambitious targets present opportunities for companies that are well positioned for the green energy transition. 

For example, PTTEP (SGX: TPED) intends to reach net zero greenhouse gas emissions by 2050. 

PTTEP has also set an interim target to reduce greenhouse gas emissions intensity by at least 30 percent by 2030 and 50 percent by 2040, compared to the 2020 base year. 

Recently, PTTEP made a strategic investment in the largest offshore wind farm in Scotland, the UK, for approximately GBP 522 million (S$891 million) 

The investment is expected to generate immediate revenue for PTTEP, and demonstrates the company’s efforts to expand into the clean energy business. 

seagreen wind farm
Image source: PTTEP

What would Beansprout do?

With the more positive outlook for Thailand’s economy, there is reason to pay more attention to Thailand’s stock market. 

Following the steep declines in 2023, the valuation of the Thai stock market is looking more attractive. 

The SET index trades at a 2024 price-to-earnings of 14.8x, below its historical average of 16x. 

In particular, CP All’s current forward price-to-earnings (P/E) valuation ratio of 27x is below its five-year historical average.  

thailand stock market valuation below historical average

With the improving economic outlook and more attractive valuation, the risk-reward of investing in the Thai stock market is starting to look better. 

However, we would still be mindful of some of the risks, such as delays in implementation of the digital wallet, as well as rising government debt to fund the stimulus programmes. 

If you are keen to gain exposure to Thailand, you can now invest in Thai blue chip companies such as CP All and AOT through Singapore Depository Receipts (SDR) on the Singapore Exchange. 

The CP All SDR trades on the SGX under the stock code TCPD, the AOT SDR trades under the stock code TATD, and PTTEP SDR trades under the stock code TPED

You will be able to buy Singapore Depository Receipts directly through a stock trading platform which offers trading on the Singapore Exchange. 

Click here to read our earlier article explaining what are Singapore Depository Receipts.  You can also find more resources on the SGX product page.

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