Capital market and business valuation insights - September 2024

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• The Thai capital market (SET Index) has continued its declining trend from the previous quarter, showing a decoupling from the MSCI Developed and Emerging Indices over the last three quarters.
• The Monetary Policy Committee (MPC) meeting on 12 June 2024 projected economic growth expectations of 2.6% and 3.0% for 2024 and 2025, respectively, supported by an improvement in tourism, stronger-than-expected domestic demand in the first quarter, and acceleration in government disbursements during the second quarter.
• Exports are expected to be dampened by competitiveness issues and adjustments in global demand for capital goods.
• The significant level of household debt is expected to be a key headwind to credit growth and was high on the MPC’s list of concerns for the Thai economy.
• The SET Index has continued to underperform into the third quarter, with global sell-offs in July and August impacting the valuation of SET components.

• US federal funds rate: In its July meeting, the Federal Open Market Committee (FOMC) continued to maintain the target range for the federal funds rate at 5.3% to 5.5%. But with inflation cooling, a greater focus on unemployment is expected, heralding rate cuts in the near term.
• Inflation: Thai headline inflation is expected to recover to the target range of 1.0% to 3.0% by the end of 2024. Headline inflation is projected at 0.6% and 1.3% in 2024 and 2025, respectively, as the impact of the domestic diesel price subsidy and surplus supply of certain raw food items slowly diminishes.
• Thai policy interest rate: In June, the MPC voted 6 to 1 to maintain the policy rate at 2.5%. One member voted to cut the policy rate by 25 basis points to partly alleviate debt-servicing burdens for borrowers. Thai government bond yields have increased from the previous quarter following adjustments in market expectations on Thailand’s monetary policy
• Corporate credit risk spread: The BBB+/BBB corporate credit risk spread has continued to decline from the previous quarter, reflecting improved confidence on corporate credit quality. 

• The SET lagged behind all other illustrated indices over the 1-year and 5-year observation periods. The MSCI Developed recorded the best absolute and volatility-adjusted returns. 

• The Total return index (TRI) is an index that measures the total return from investing in securities. It comprises (1) a return arising from the change in value of the securities or “capital gain/loss” and (2) dividends paid, assuming they are reinvested in the securities.
• At 3.7%, the 2024 dividend yield is the highest since 2020.

• The SET sector classification serves as the principal criterion for the illustrated sectors.
• The sector valuation multiples and beta are based on the respective median.
• 12-month trailing multiples are derived from Q2 2023 to Q2 2024.
• The Q2 2024 multiple is based on the latest available financial statement information as at Q1 2024.
• Data in historical periods may change according to Capital IQ’s retrospective adjustments.

• The total number of trading days per year is assumed to be 252 days.
• The period in the study is 1 July 2019 – 30 June 2024.

• Annual dividend yields are based on dividend yields from Bloomberg.

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