SCB Securities (SCBS) remains upbeat that the Thai bourse will reach 1,900 points by year-end, driven by public and private investments, bank loan growth and improved private spending stimulated by the mid-year budget.
Despite prospects of a rise in oil prices and heightening geopolitical tensions in the Middle East, Thailand's economy is expected to be bolstered by a private investment recovery and continued robust consumption compared with last year, said SCBS senior vice-president Isara Ordeedolchest.
Based on the latest economic forecast by the International Monetary Fund, the global economy is projected to grow 3.9% this year, driven by an upward revision of the US economic forecast, Mr Isara said, adding that Thailand's exports will continue to grow in these circumstances.
Although there could be an impact on investment sentiment regarding the Thai bourse, the conflict in Syria is viewed as a proxy war between Russia and the US and it is believed that the two countries will find a solution through negotiations, he said.
The Stock Exchange of Thailand (SET) index is expected to move narrowly in the second quarter in a range of 1,750-1,800 points, Mr Isara said.
Earnings per share among SET-listed companies should hit 110 baht in 2018, up from 100 baht last year, and reach 120 baht in 2019, he said.
Top picks for stocks in the second quarter are those in the banking sector, as SCBS expects loans to resume growth and asset quality to improve in the first half.
Retail stocks are also set to go up, a prediction attributed to the government's plan to invest part of its mid-year budget to stimulate consumer spending, Mr Isara said.
Healthcare stocks are also of interest because they have lagged behind their counterparts despite profits that are expected to grow robustly in 2018, he said.
The increased popularity of health insurance is likely to help stir healthcare spending in Thailand in the long term.
At present, there are two main risk factors posing a threat to the global economy and financial markets, Mr Isara said.
The first is mounting concerns over higher interest rates and financial costs.
US interest rates are likely to rise sooner than expected, since the inflation rate is poised to accelerate in the wake of an intensified labour market, Mr Isara said.
The output gap has also widened, indicating that production capacity utilisation is accelerating in many business sectors and growth momentum may be stronger than expected.
Under this scenario, the forecast calls for the US Federal Reserve to raise its policy interest rate four times this year, up from three times projected earlier, according to SCBS.
The second risk factor comes from worries over a global trade war re-emerging.
Since US President Donald Trump was elected in November 2016, the US has imposed import tariffs on solar energy, washing machines, steel and aluminium, Mr Isara said.
Although the US has relaxed the tariffs for some trade partners, including Australia, Canada and Mexico, the latest announcement of its plan to raise import tariffs, which has led to retaliation by China, has intensified tensions and fuelled concerns about the emergence of a trade war.
Separately, the Commerce Ministry's Trade Policy and Strategy Office (TPSO) anticipates that US military action against Syria will incur a short-term psychological effect on the commodity market because a full-scale military operation by the US, Russia and Iran is unlikely to occur.
If there are no further outbreaks of violence, prices of oil and gold bullion are expected to return to their usual range in the coming period, according to the TPSO.
