Thailand's stock market is poised to remain volatile next year due to the Sino-US trade dispute and the Federal Reserve's interest rate normalisation, says Bualuang Securities (BLS).
Investors are recommended to reduce equity investment to 50% in their portfolios and add low-risk assets such as real estate investment trusts (REITs) and infrastructure funds, said BLS executive vice-president Chaiyaporn Nompitakcharoen.
In BLS's base-case scenario, China and the US come to terms on their trade disputes and withdraw the tit-for-tat tariffs, resulting in continuous growth in the global economy, Mr Chaiyaporn said.
If the world's two largest economies cannot resolve their differences, this will have an impact on global trade and induce a global economic slowdown, he said.
China's economic growth could weaken as a result of the trade disputes and this would subsequently take a toll on Thai exports to China, Mr Chaiyaporn said.
The Fed, meanwhile, is expected to raise interest rates twice in 2019, while the Bank of Thailand's Monetary Policy Committee is anticipated to make a one-time rate hike by 25 basis points, according to BLS.
"BLS expects that fund outflows have already bottomed out from emerging markets, including the Thai stock market," Mr Chaiyaporn said. "Foreign investors were net buyers of Thai equities in November, and the trend is expected to continue into next year as emerging markets will generate good investment returns.
"The US economy is projected to slow slightly, with the US stock market anticipated to decline in next year's first half. The economy is expected to experience a recession in 2020, resulting in a depreciation of the US dollar."
The baht has on average fluctuated 3-4% this year as Thailand's high foreign reserves, low public debt, robust financial institutions and the good performance of many SET-listed companies have provided cushions for the local currency against external volatility, according to BLS.
In 2019, Thailand's economic growth is projected to ebb from the Sino-US trade disputes and lower tourism growth, Mr Chaiyaporn said.
As prevailing risks could affect investor sentiment next year, BLS recommends diversifying investment portfolios by investing 50% in stocks (equally in global and domestic stocks), 40% in fixed-income securities, REITs and infrastructure funds, and the rest in gold and cash.
