The past week delivered multiple warning signals from the global economy: a US-China summit that ended with smiles but little substance, the most severe global bond selloff in years, Federal Reserve minutes signalling a potential interest rate hike, and a Middle East war that has dragged on far longer than markets anticipated.
At home, Thailand offered good news as first-quarter economic growth beat expectations, though critics still have reservations about the government's 400-billion-baht stimulus package.
The Trump-Xi summit in Beijing resulted in a "constructive strategic stability" framework, China ordering 200 Boeing aircraft and committing to buy US farm goods and energy, and hints about establishing a joint trade and investment committee.
Yet markets reacted negatively, and understandably so. No meaningful deal emerged on rare earths or artificial intelligence, while Taiwan tensions remain unresolved. InnovestX assesses the summit as a tactical de-escalation, not a strategic resolution. Stress has been reduced, but the technology war continues.
Global bond markets have been hit by the worst simultaneous selloff in years. US consumer inflation in April came in at 3.8%, while producer prices accelerated to their fastest pace since 2022, pushing the 10-year US Treasury yield to 4.59%.
UK 30-year gilts surged to 5.86%, the highest since 1998, while Japan's 30-year government bond reached a historic high of 4.085%. The sharp rise in Japanese yields carries an additional tail risk: a potential yen carry trade unwinding that could trigger tighter global liquidity conditions.
INFLATION ANXIETY
Of greater concern is the recent Fed minutes revealing a majority of policymakers are beginning to signal readiness to raise rates if inflation remains persistently above the 2% target. This is a significant pivot from earlier this year, when the Fed was signalling a path towards accommodation. The Iran war is causing oil to remain above $100 per barrel, with energy costs and supply chain pressures keeping inflation elevated.
For Thailand's bond market, the 10-year yield rose to 2.40%, facing additional pressure from the 400-billion-baht emergency borrowing decree, which has pushed fiscal 2026 borrowing above its Covid-era peak. InnovestX maintains its year-end forecasts of 4.40% for the US 10-year Treasury and 2.50% for the Thai 10-year bond -- both above market consensus.
Thai first-quarter GDP grew 2.8% year-on-year, beating the market consensus of 2.2%. Private investment surged 10.1%, the strongest reading in 14 quarters, led by the digital and electronics sectors, while merchandise exports gained 15.1%.
However, the performance was driven by frontloading of exports and imports ahead of anticipated disruptions from the Middle East conflict, which should moderate in the second and third quarters as elevated energy costs pass through to households and business expenses.
If the stimulus funds are disbursed in full, the package could add 0.4 percentage points to GDP growth through the co-payment stimulus scheme and energy transition investment measures. The latter portion awaits a Constitutional Court ruling, which if struck down would reduce the upside to GDP. Our base case assumes a disbursement rate of 55% of the total.
SELECTIVE BUYING
We recommend a selective buy strategy anchored by three themes. The first is earnings-play stocks, for which second-quarter and second-half 2026 profits are expected to grow solidly, including ADVANC, AP, GULF, MINT, MTC, SCGP and TIDLOR.
The second is defensive stocks with high pricing power, capable of withstanding rising input costs and sustained inflation, concentrated in the telecom, healthcare and commerce sectors.
The third theme is stocks riding structural S-curve transitions and benefiting from the energy transformation, including clean energy, industrial estates and related businesses.
Dr Piyasak Manason heads the Investment Strategy Department, INVX-Research Group, at InnovestX Securities.
