“Investor Confidence rises to very bullish zone for the first time in 2 years

Investors anticipate fund flow and domestic economic growth to drive the country’s economy  

Local political situation and worries over the nation’s economic retreat cloud sentiment

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FETCO Press Release: Thursday 3 December 2020

Paiboon Nalinthrangkurn, Chairman of the Federation of Thai Capital Market Organizations (FETCO), revealed investor confidence in November 2020 showed that “the FETCO Investor Confidence Index (FETCO ICI) for the next three months rallied to 161.41, or 161 percent surge from the previous month, reaching “very bullish” zone for the first time in two years. Investors anticipated fund flow to be the most supportive factor. Domestic economic recovery and direction of U.S. Federal Reserve’s monetary policy as well as successful results of Covid-19 vaccine development also helped buoy up the momentum. However, local political situation undermined investor’s sentiment the most, followed by domestic economic hiccup and disputes among the world’s powerhouses.

Highlights of FETCO Investor Confidence Index surveyed in November 2020 are as follows;

  • FETCO Investor Confidence indices across investor types for the next three months (February 2021) enters to “very bullish” zone (160-200 of FETCO ICI Criterion) for the first time in two years at 161.41 or a 161 percent rise.
  • Investor confidence of retail and institutional investors moved up to “bullish” zone while investor confidence of proprietary traders and foreign investors accelerated to “very bullish” territory.
  • Most attractive sector to investors was Energy (Energy).
  • Least attractive sector to investors was Insurance (INSUR).
  • Most influential factor driving the Thai stock market was fund flow.
  • Most important factor impeding the Thai stock market was local political situation.

“The results of November 2020 survey showed that investor confidence across investor types significantly increased. Retail investors notched up 91 percent to 150. Proprietary traders skyrocketed 167 percent to 166.67. Institutional investors jumped 150 percent to 156.52 while foreign investors soared 338 percent to 175.

During November 2020, SET index bounced back following a series of positive catalysts, including the successful results from crucial trials of Covid-19 vaccine conducted by Pfizer/BioNTech, Moderna and AstraZeneca that showed highly effective prevention of Covid-19 infection; and the U.S. election result that showed Joe Biden would be elected as 46th President of the U.S. Domestic catalysts included Thailand’s 3rd quarter GDP contracted by 6.4% year-on-year in the third quarter, which was better than expected, boosted by the government’s stimulus package that aimed at spurring domestic consumption. In addition, earnings of listed companies during July to September 2020 shot up 24 percent, thanks to the relaxation of Covid-19 containment measures that freed up rooms for businesses to return to normalcy. Following the aforementioned factors, foreign fund inflow returned to the Thai stock market, making November the first month of this year that foreign investors clocked in as net buyers. SET Index rose 17.9% from the previous month to close at 1,408.31 at the end of November.

Investors anticipated the fund flow would be the most supportive factor, followed by local economic growth and the direction of U.S. Federal Reserve’s monetary policy as well as the success of Covid-19 vaccine development. However, local political situation weighed down confidence the most, followed by worries over local economic retreat and disputes among global powerhouses.

Eyes are on the U.S. government transition, how the U.S. would move under Joe Biden’s policy and the development of European economy after the second wave of Covid-19 triggered tightened lockdown measures to contain the spread. Internal factors to watch include political uncertainty, which is crucial to the country’s economic recovery; additional government’s stimulus package to entice private consumption; and a series of budget approvals granted to projects worth THB 400 billion altogether.”

Interest Rate Expectation Index for December 2020 

In line with last time, the Index reflected 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 December. According to the survey conducted on November 23, 2020, the 5-year and 10-year government bond yields at the end of the fourth quarter is likely not much changed.

However, many respondents expected the decreasing of 5-year and 10-year government bond yields due to the fund inflows in the bond market during the year end. In addition, they believed that foreign fund flows will move into the Thai bond market and emerging markets in the clearer sign of the U.S. political situations and more compromise international policies of Biden.

Ariya Tiranaprakij, Deputy Managing Director of the Thai Bond Market Association, revealed highlights from Interest Rate Expectation Index for December 2020 as follows:

  • The Interest Rate Expectation Index for December on MPC’s policy rate slightly declined at 46 point but remained in “Unchanged” range, reflected the market view that the MPC is expected to hold its policy rate at 0.5% at its meeting in December since the current rate is already low. Bank of Thailand might need to maintain this rate and will cut the policy rate if Thai economic is not well-recovered and bath protection measure not well-performed.
  • The Interest Rate Expectation Index on yields of 5-year and 10-year government bonds at the end of the fourth quarter remained unchanged, reflected the market view that the 5-year and 10-year government bond yields are likely to still hover around 0.84%and 1.41% respectively (as of the survey date of November 23, 2020). The expectations are subjective to local economic uncertainties, global policy rate trends and foreign fund flows.