“Investor Confidence retreats to neutral zone

Investors expect FED to keep its expansionary monetary policy approach while eyes are on listed companies’ earnings

Worries over FED’s hawkish stance and local economic retreat cloud sentiment”

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                                                                       FETCO Press Release: Monday, 7 February 2022

 

Paiboon Nalinthrangkurn, Chairman of the Federation of Thai Capital Market Organizations (FETCO), said “the FETCO Investor Confidence Index (FETCO ICI) in January, which anticipated the market condition over the next three months, is at 93.91, down 27.5 percent from the previous month and retreated to “neutral” zone. Top three most supportive factors anticipated are, expectation that the U.S. Federal Reserve will maintain its loose monetary policy, local listed companies’ earnings, and COVID-19 vaccine distribution. However, investors are worried about uncertainty over Fed’s interest rate hike direction, followed by local economic retreat and international conflicts.   

Highlights of FETCO Investor Confidence Index surveyed in January 2022 are as follows.

  • Overall FETCO Investor Confidence index for the next three months (April 2022) is in “neutral” zone (80-119 of FETCO ICI Criterion), falling 27.5 percent to 93.91 from the previous month.
  • Confidence of retail and local institutional investors is in “bullish” zone while that of proprietary investors and foreign investors is in “neutral” and “bearish” zone, respectively.
  • Most attractive sector to investors is Banking (BANK).
  • Least attractive sector to investors is Insurance (INSUR).
  • Most influential factor driving the Thai stock market is expectation that the Fed will maintain its loose monetary policy.
  • Most important factor impeding the Thai stock market is uncertainty over Fed’s hawkish stance.

 

“The survey result in January 2022 shows that retail investors’ confidence declined 4.6 percent to 121.74. Confidence of proprietary traders and local institutional investors rose 8.3 percent to 108.33 and 2.9 percent to 125.00, respectively. Foreign investors’ confidence fell 64.3 percent to 50.00.”

In January 2022, the SET Index moved in tight range of 1,634.17—1,680.02. Fluctuation kicked in early of the month, rattled by worries over Fed’s more hawkish-than-expected stance and the possibility of its multiple interest rate hikes. Cases of the Omicron variant spiked upwards over the new year holiday period, which consequently triggered the government to delay its quarantine-free travel scheme plan, also dampened sentiment. Then late in January, the SET Index declined in line with global stock markets after Fed’s meeting sparked concerns over its interest rate hike direction. The SET Index at the end of January closed at 1,648.81, down 0.5 percent from the previous month.

 

External factors to monitor include Omicron variant infection update, which remains crucial to economic recovery in several countries as it’s spreading faster than other variants, and impact from the U.S.’ tightening monetary policy imposed to tackle rising inflation. Fed plans to speed up its QE tapering move, which is due to complete in March 2022. This will impact liquidity in financial market as the move is sooner than market previously forecast. In addition, Fed’s hawkish rhetoric signaled multiple rate hikes this year. Energy shortage in Europe is also on the radar as it may trigger inflation to rise in European zone. However, the European Central Bank plans to move toward easing monetary policy, similar to the approach taken by China’s Central Bank. Besides, there are international conflict issues to keep an eye on such as Russia-Ukraine tension and the situation in the Middle East. Internal factors to consider comprise of rising price of consumer goods as a result of higher production cost, which will impact household spending, the government’s plan to ease COVID-19 restriction measures to welcome tourists and uncertainty over domestic political situation.”