Global markets received a lift this month from the US-Iran ceasefire and pledges to reopen the Strait of Hormuz, resulting in a gradual pick-up in vessel movements and a drop in oil prices to pre-war lows.
The majority of Federal Reserve policymakers foresee one rate increase by year-end, compared with previous forecasts for rate cuts. The market anticipates the first move at the September meeting.
For alternative assets, we believe gold will outperform oil for the remainder of the year, as the Bloomberg consensus targets an average year-end gold price of $4,800 per ounce.
The VN-Index has risen 40.6% over the past year, settling around 1,863 points on June 25 after hitting an all-time high of 1,937 in May. FTSE Russell confirmed in April Vietnam would be upgraded from frontier to secondary emerging market status from Sept 21, with inclusion in the FTSE global indices phased through 2027.
Meanwhile, the Jakarta index has fallen over 28% this year with foreign investors pulling out $3.8 billion since January, making it one of the worst-performing indices.
For Thailand, we forecast a year-end SET index target of 1,550, or 16 times price/earnings (PE), implying a more balanced risk-reward profile from current levels. Valuations are no longer compelling, with the earnings yield gap narrowing to 3.9%, below its 10-year average of 4.4%. Recent earnings per share (EPS) upgrades have been driven largely by volatile energy and petrochemical earnings linked to the Iran conflict. As geopolitical tensions ease, we see a risk of earnings estimates normalising lower in the second half of 2026 and into 2027.
TOP PICKS
We re-rated industrial estate, construction and telecom stocks, with key catalysts priced in. We recommend tourism, healthcare, consumer finance and utilities -- sectors that have corrected by more than 10% since the conflict began despite earnings downgrades of 0-4%, leaving valuations attractive. Our top picks:
AOT (target price 66 baht): Rising short-haul and transit traffic, with transit passenger service charge (PSC) monetisation a key catalyst for fiscal 2028.
BA (target price 23 baht): The most resilient airline, supported by 5% year-on-year growth in Samui bookings. Higher PSC and a buyback from BAREIT provide additional upside, while the stock trades at only 10.6 times PE.
ERW (target price 3.60 baht): Chinese arrivals support Bangkok hotels, while European tourists continue to favour Pattaya. Near-term catalysts include 5% growth in room revenue and HOP Inn expansion.
BH (target price 215 baht): Recovery in Middle East patients, which account for 23% of revenue, supports a 5% average annual growth rate, versus the sector average of 2%.
CHG (target price 1.75 baht): Our preferred play in light of a potential Social Security reimbursement rate hike, trading at a discount to BCH at 15 times PE.
TIDLOR (target price 25 baht): The hire-purchase firm is supported by 15% EPS growth, lower credit costs and a 4.2% buyback yield.
GPSC (target price 50 baht): Potential upside from PTT Group small power producer acquisitions and progress on an energy recovery unit co-generation project remain undervalued by the market.
