Unusual Trends in Thai Equities During July
July brought an unusual pattern to the Thai stock market, with the SET index reaching its lowest point on the first day of the month and peaking on the last day. The trading range was quite wide, fluctuating between 1,086.56 and 1,251.16 points. This volatility was driven by a mix of global economic factors and domestic developments.
During the first half of July, the market moved sideways, as investors closely followed news about tariffs. A significant concern arose when Vietnam reached an agreement with the United States for an import tariff rate of 20%, significantly lower than Thailand’s 36% rate. This created panic among investors, especially after Indonesia was assigned a 19% tariff rate, raising fears about Thailand’s competitiveness.
However, the Thai government reassured the public that negotiations were progressing well and that the final tariff rate would remain competitive. Despite these concerns, global markets, particularly the Nasdaq, saw strong gains during the month, which helped provide some positive sentiment to the SET index.
Attractive Valuations and Positive Sentiment
The SET index has been appealing due to its relatively low valuations, having dropped as much as 20% from the start of the year at certain points. Additionally, expectations of a more dovish approach from the new Bank of Thailand governor contributed to a rise in the SET beyond 1,200 points. Strong second-quarter earnings from banks also played a role in the positive momentum during the latter part of the month.
Rumors of a potential 19% US tariff rate for Thailand further boosted investor confidence. By the end of July, the SET closed at 1,242.35 points, marking a 14% increase from the end of June. Average daily turnover also rose, increasing by 7.3% to 42 billion baht.
August Starts with Optimism
The beginning of August was marked by a positive outlook, as the confirmed 19% US tariff rate was seen as a win for Thailand. The SET index continued to climb, reaching a peak of 1,280 points in early August. However, the index remains a laggard compared to global markets, with a year-to-date return of -11% and a forward price/earnings ratio of only 13 times, below the average of 19 times for developing markets.
Political Risks in August
A major risk in August lies in the political arena. If the Constitutional Court finds Prime Minister Paetongtarn Shinawatra guilty of an ethics violation on August 29, it could lead to the dissolution of the government. This could delay the 2026 budget for up to six months. Given that tariffs are already pressuring economic growth, any delay in the budget could worsen the situation, especially in the fourth quarter.
August Investment Picks
With global risk assets performing well, the SET is expected to benefit from the positive sentiment. Recently, the index rallied over 100 points, mainly driven by three stocks: DELTA, AOT, and SCC.
August is viewed as a positive month, with a cautious and selective investment approach. Export-related stocks are being avoided, while focus is placed on domestic plays and companies with strong second-quarter earnings and positive outlooks for the second half of the year. The recommended picks include AMATA, COM7, GULF, and SCB.
Company Highlights
AMATA recently announced a second-quarter net profit of 140 million baht, down 83% from the previous quarter and 39% year-on-year. The result missed expectations primarily due to higher-than-expected tax expenses. Excluding this item, core profit would have been 342 million baht, down 59% quarter-on-quarter and 17% year-on-year. The company expects improved results in the second half as it begins transferring some of its industrial land sales backlog. AMATA remains focused on its target of selling 3,000 rai of land, with Chinese businesses as key clients.
COM7 reported a second-quarter net profit of 915 million baht, representing a 22% year-on-year increase but a 7% decline from the previous quarter. The company anticipates continued momentum from smartphones and tablets, driving sales growth by 12% year-on-year to reach 20.6 billion baht. COM7 also closed some loss-making branches to control costs and benefits from government policies supporting solar cell use through tax exemptions up to 200,000 baht.
GULF remains a top pick, with a recent investment of US$128 million in the Pak Lay hydroelectric project in Laos, increasing its stake to 100%. The project is scheduled to start operations in 2032 and has a 29-year contract with the Electricity Generating Authority of Thailand. This investment is expected to add 0.5 baht per share to GULF. The company also announced a second-quarter net profit of 63.9 billion baht, including a one-time item related to the amalgamation with INTUCH. Core profit, excluding all extras, was 7.1 billion baht, up 9% quarter-on-quarter and 27% year-on-year.
SCB has emerged as a strong dividend payer. It recently announced a second-quarter net profit of 12.8 billion baht, showing a 2% quarter-on-quarter increase and a 28% year-on-year growth, outperforming market expectations. First-half profits were also better than anticipated, mainly due to investment gains. This performance should support a dividend not lower than last year’s payout (10.44 baht per share based on 2024 net profit). The expected dividend yield for SCB in 2025 is as high as 8%.
