Investor Confidence retreats to bearish zone Investors expect vaccine distribution to improve COVID-19 situation and local economic recovery

Wednesday 04 August 2021 09:42
Paiboon Nalinthrangkurn, Chairman of the Federation of Thai Capital Market Organizations (FETCO), said "the FETCO Investor Confidence Index (FETCO ICI) in July, which anticipated the market condition over the next three months, is at 64.37, dropping 39.3 percent from the previous month, and enters "bearish" zone. COVID-19 vaccine distribution to help ease COVID-19 situation is the most supportive factor investors have anticipated, followed by pace of local economic recovery and how government's policies will shore up the economy. However, worsening COVID-19 pandemic in Thailand, followed by international conflicts and the country's economic retreat are the most concerning factors.
Investor Confidence retreats to bearish zone Investors expect vaccine distribution to improve COVID-19 situation and local economic recovery

Highlights of FETCO Investor Confidence Index surveyed in July 2021 are as follows;

  • Overall FETCO Investor Confidence index for the next three months (October 2021) is in "bearish" zone (40-79 of FETCO ICI Criterion), falling 39.3 percent to 64.37 from the previous month.
  • Confidence of investors across all types is subdued to "bearish" zone.
  • Most attractive sector to investors is Electronic Components (ETRON).
  • Least attractive sector to investors is Fashion (FASHION).
  • Most influential factor driving the Thai stock market is vaccine distribution to improve COVID-19 situation.
  • Most important factor impeding the Thai stock market is the worsening COVID-19 spread.

"The survey result in July 2021 shows that the confidence of investors across all types falls 40.1 percent to 65.79. That of proprietary traders drops 40 percent to 50.00. Confidence of local institutional investors declines 55.5 percent to 57.89 while that of foreign investors is down 33.3 percent to 66.67."

COVID-19 confirmed cases in Thailand spiked in July in parallel with the rise of the number of deaths. Coupled with disputable vaccine procurement and distribution, the SET Index was suppressed throughout the month. Especially the latter half of July, the benchmark index was pressured further following the lockdown measures to curb the COVID-19 infection. Weakening Thai Baht against the US dollar saw fund outflow of around THB 17.7 billion in July. However, the government's supporting measures worth of THB 42 billion to aid people and businesses impacted from the lockdown measures, which took effect in 10 red zone provinces, as well as utilities electricity and utility bill relief partially helped cushioned the downside. In addition, major Central Banks including Fed and ECB keeping their dovish approach to shore up economic recovery amid heightened risks helped ease some anxiety. As a result, the SET Index closed at 1,521.92, down 4.15 percent from the preceding month.

Eyes are on the Jackson Hole Symposium, which will be held during 26-28 August 2021, as investors anticipate QE tapering signal from Fed. Direction of China's control over investment in Chinese securities, especially in Technology sector, will also be monitored. In addition, conflicts among OPEC members, which might trigger global oil prices to volatile are on the watch. Locally, how private consumption will be hit following tightening restriction control to curb COVID-19 spread, is the cue to follow. With the currently worsening COVID-19 situation, the government's plan to fully reopen the country within this year is unlikely to be on track. Therefore, the stimulus moves from the fiscal policies will be watched closely as it will impact Thailand's path to economic recovery.

Interest Rate Expectation Index for August 2021

The Index reflects market's expectation that Bank of Thailand's Monetary Policy Committee (MPC) will keep its policy rate unchanged at 0.5% at its meeting in August. Yields of 5-year and 10-year government bonds at the end of the third quarter are expected to remain unchanged from the date that this survey was conducted (16 July 2021). More number of respondents anticipated that yields may rise as growing number of vaccinated people is likely to help accelerate the reopening. As a result, the U.S. Treasury yields are likely to rise, which could trigger yields of the Thai government bonds to follow suit. However, some survey respondents view that yields of the Thai government bonds, on contrary, may fall following the government's growing financial relief to help those impacted from COVID-19 spread.

Ariya Tiranaprakij, Deputy Managing Director of the Thai Bond Market Association, revealed highlights from Interest Rate Expectation Index for August 2021 as follows;

  • The Interest Rate Expectation Index for August on MPC's policy rate remains unchanged at 47 from the previous survey and remains in "Unchanged" zone. It reads that the MPC is expected to keep its policy rate steady at 0.5% at its meeting in August following the slower-than-expected economic recovery. In addition, the Bank of Thailand has put in place financial measures to support SMEs and ease household debt burden, therefore, the necessity to cut its policy rate further is narrowed.
  • The Interest Rate Expectation Index on yields of 5-year and 10-year government bonds at the end of the third quarter remains in "Unchanged" zone. The index read parred at the same level from the previous survey. Greater number of respondents expected yields to rise while some viewed the opposite. This reflects that the yields of 5-year and 10-year government bonds are likely to remain unchanged from 0.82% and 1.66% respectively as of the survey date (16 July 2021). Main factors anticipated include demand and supply in the debt market, global interest rate trend as well as the local economy.

Source: Federation of Thai Capital Market Organizations