“May 2020 survey shows FETCO ICI in Neutral Zone as investors concern on
listed company earnings and domestic economic growth while placing their hopes on government policies and the recovery of the tourism sector.”
FETCO Press Release: Monday 11 May 2020
Paiboon Nalinthrangkurn, Chairman of the Federation of Thai Capital Market Organizations (FETCO), commented on the May 2020 FETCO Investor Confidence Index (ICI): “The Investor Confidence Index for the next three months has risen into the neutral zone after being bearish for three consecutive months. The survey found that investors see government policies as the most encouraging factor, followed by domestic economic growth, the recovery of tourism, and the discovery of a COVID-19 vaccine. However, investors are concerned about the performance of listed companies as well as the domestic economy, capital flows, and a possible second outbreak of the COVID-19 virus.”
Results of the FETCO Investor Confidence Index for April 2020 are summarized below:
- FETCO Investor Confidence Index (ICI) for the next three months (through July 2020) for all groups of investors rose 42% to 80.40, residing within the neutral zone (index range 80–119).
- ICIs for retail investors, proprietary traders, and local institutional investors were up into the neutral zone.
- Foreign investor ICI rose slightly but remained bearish.
- The Food & Beverage (FOOD) sector drew the most investor interest.
- The Tourism & Leisure (TOURISM) sector was least attractive for investors.
- Government policy was the factor boosting the Thai stock market the most.
- Concerns about the performance of listed companies were the biggest drag on the Thai stock market.
“April survey results show the FETCO Investor Confidence Index (ICI) increased into the neutral zone after being bearish for three consecutive months. ICIs for all groups of investors climbed into the neutral zone except that for foreign investors which despite increasing slightly remained bearish.
During April, the Stock Exchange of Thailand (SET) Index increased over March due to remedial measures implemented by the government such as the Royal Decree for issuing THB 1 trillion in loans, the Bank of Thailand’s issuance of THB 9 billion to help SME’s, and the Bank of Thailand’s setting up a Bond Stabilization Fund (BSF) to increase liquidity in the bond market. In the first half of the month, the SET Index moved within a range between 1,100 – 1,250 points. After that, the SET Index adjusted upward after the number of Thais infected by the virus continued to decrease as a clear result of various public and private measures. At the end of April 2020, the SET Index closed at 1,301.66.
Investment trends for the next three months show investors placing their hopes on government policies. Investor confidence was further boosted by anticipation of domestic economic growth, a recovery of the tourism sector, and the discovery of a COVID-19 vaccine. However, investor confidence is tempered by listed company earnings, domestic economic growth, capital inflows/outflows, and concerns about a second outbreak of COVID-19.
Global economic factors which warrant monitoring include: production of a COVID-19 vaccine; a subsequent outbreak of the COVID-19 pandemic as many countries begin to relax lockdown measures; a global economic recession; and concerns about the US-China trade war. Domestic factors which must be monitored include first quarter earnings reports by listed companies; business recovery measures for those businesses affected by COVID-19, especially in tourism and the Agribusiness sector; as well as solving labor market problems associated with temporary workers, the self-employed, and SME employees”.
Interest Rate Expectation Index for May 2020
Results from the Interest Rate Expectation Index show the market expects that the policy interest rate will likely be cut from the 0.75% level at the Bank of Thailand’s MPC meeting in May. Meanwhile, yields on 5-year government bonds and 10-year government bonds are seen as likely not to increase in the ten weeks following the April 17, 2020 survey. These sentiments result from the respondent’s expectations that even though the MPC may cut the policy interest rate, there may be an increased supply of government bonds for use in economic stimulus measures in order to raise funds and mitigate the effects of the lockdown.
Ariya Tiranaprakij, Deputy Managing Director of the Thai Bond Market Association (ThaiBMA), commented on the Interest Rate Expectation Index for May 2020 with the following details:
- The Interest Rate Expectation Index for the next Bank of Thailand MPC meeting being held in May stands at 16, slightly higher than the previous report but staying in the decrease range. This reflects the market sentiment that the MPC meeting in May will possibly cut the policy interest rate from 0.75 percent due to the primary factors of negative trends in economic growth, the trending decline in global interest rates, and the net capital outflow of foreign investments.
- The Interest Rate Expectation Indices for 5-Year and 10-Year Government Bonds through the Bank of Thailand MPC meeting in June 2020 (about 10 weeks out) are at 42 and 39 respectively, increasing slightly from previous levels but still within the index’ unchanged range. These levels reflect the market view that 5-year and 10-year bond yields may not change much from the 0.7% and 1.39% respectively (as of the survey date of April 17, 2020). Key factors supporting these outlooks include supply and demand in the bond market, the domestic economic growth rate, trends in global interest rates, and international fund flows.